As a small business owner, you want to provide your employees with the best possible benefits—including retirement savings. Unfortunately, many small businesses don’t have access to traditional 401(k) plans due to their limited size and resources. Luckily, there are other ways for you to help your employees save for retirement. Let’s explore some of these options.
IRA Contributions
The most common form of retirement savings plan available to small business owners is an Individual Retirement Arrangement (IRA). An IRA is a tax-advantaged savings account designed to help individuals save money for retirement. IRAs can be funded through a variety of sources, including employer contributions and employee salary deferrals. The annual contribution limit for 2023 is $6,500, or $7,500 if the employee is age 50 or older. These contributions are also tax deductible. Additionally, employers can offer employees the option of making pre-tax salary deferrals into their IRA accounts up to the annual limit set by the IRS.
SEP IRA Plans
Another great option is a Simplified Employee Pension (SEP) IRA plan. A SEP plan allows employers to contribute up to 25% of an employee’s salary each year into an individual retirement account on behalf of each eligible employee. This contribution is fully tax deductible and those funds remain untaxed until they are withdrawn during retirement. It’s important to note that all employees must receive the same percentage of salary contribution from their employer. This type of plan works best for companies with relatively few employees and equal salaries across the board.
SIMPLE IRA Plans
Small business owners looking to secure the future of their retirement may want to consider a SIMPLE IRA plan. SIMPLE IRA stands for Savings Incentive Match Plan for Employees of Small Employers and allows businesses with 100 employees or less to make contributions to an employee’s retirement savings account. All employees over the age of 18 and who have worked at least 1000 hours in the last two years are eligible. Meaning SIMPLE IRAs can be advantageous in helping competitively recruit new talent. Furthermore, SIMPLE IRAs provide tax benefits to employers and individuals alike that should be reviewed when considering financial plans. Ultimately, SIMPLE IRAs could be an excellent addition to any small business’s arsenal of retirement options.
When it comes down it, helping your small business employees save for retirement doesn’t have to be complicated or expensive! With so many different options available—from IRAs and SEP IRAs to SIMPLE IRA plans—there’s something out there that fits almost any budget and provides real financial security for your team members in the future. By taking advantage of one (or more!) of these options today you can rest assured that your staff will be well taken care of when they retire down the line!
Contact us today to learn more about helping small business employees achieve financial security through retirement savings.
Disclaimer: This article is not expert advice. Limitations and conditions may apply. Please check with your local Independent Insurance Agent for details.
