Tax planning is essential to Wealth Building. Starting and executing a retirement plan for owners and employees helps everyone win the tax efficient part of Wealth Building.
One survey found that 79% of small business owners expect at least some of their retirement income to come from tax-advantaged retirement savings accounts.1 If you have yet to develop a retirement plan for your business, or if you’re not sure the plan you’ve chosen is the right one, here are some things to consider.
How much can my business afford to contribute?
The cost of contributions may be managed by the plan type.
A simplified employee pension plan (SEP) is funded by employer contributions only. SEP contributions are made to separate IRAs for eligible employees.2
Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRAs blend employee and employer contributions.3 Employers either match employee contributions up to 100% of the first 3% of compensation, or contribute 2% of each eligible employee’s compensation.
A 401(k) is primarily funded by the employee; the employer can choose to make additional contributions, including matching contributions.4