When selecting a retirement plan for your small business, consider the following options, their features, benefits, and key considerations:

Common Retirement Plans

1. Simplified Employee Pension (SEP) IRA

• Description: Allows taxdeductible contributions for owners and employees.
• Contribution Limits: Up to 25% of employee compensation or a maximum of $66,000 (2023).
• Advantages: Easy setup and flexible contributions.
• Considerations: Requires equal percentage contributions for all employees.

2. Savings Incentive Match Plan for Employees (SIMPLE) IRA

• Description: Best for businesses with fewer than 100 employees; allows employee and employer contributions.
• Contribution Limits: Employees can contribute up to $15,500 (plus catchup contributions).
• Advantages: Easy to administer, encourages employee savings.
• Considerations: Employer must contribute, which can be a financial commitment.

3. 401(k) Plan

• Description: Allows higher contributions from both employers and employees.
• Contribution Limits: Employees can contribute up to $22,500 (plus catchup contributions), with total contributions capped at $66,000.
• Advantages: Higher limits, various investment options.
• Considerations: More complex and costly to administer.

4. ProfitSharing Plan

• Description: Employers can contribute a portion of profits to employee accounts.
• Advantages: Flexible contributions based on profitability.
• Considerations: Contributions can vary each year.

5. Defined Benefit Plan

• Description: Guarantees a specific monthly benefit at retirement.
• Advantages: Provides predictable retirement income.
• Considerations: Complex and costly to administer.

Key Considerations

• Business Size: Choose a plan that fits your workforce size.
• Complexity: Consider how much administrative effort you can manage.
• Cost: Evaluate setup and maintenance costs.
• Employee Needs: Assess employee participation preferences.
• Tax Implications: Understand how contributions and withdrawals affect taxes.
• Flexibility: Ensure the plan can adapt with your business growth.