401k Setup

As a small-business owner, you’re probably used to handling a lot of responsibility—everything from drawing up detailed business plans to creating a budget. So it should come as no surprise that funding your retirement will likely fall on your shoulders.
But what type of retirement plan is the right fit for your business? There are several types to choose from and the options can be confusing. For example, some small-business retirement plans are better for sole proprietors, while others may be more appropriate for businesses with up to 100 employees.
"Many small-business owners say they want to set up a 401(k) plan because that is the plan they are most familiar with," says Ken Hevert, senior vice president, retirement products, at Fidelity. "However, after reviewing their situation, small business owners often conclude that perhaps another plan type, such as a SEP IRA or a Self-Employed 401(k), may be more appropriate."
Basically, there are four types of retirement plans that small-business owners might consider:
1. Simplified Employee Pension Plan (SEP IRA)
2. Savings Incentive Match Plan for Employees (SIMPLE IRA)
3. Self-Employed 401(k) plan
4. 401(k) plan (better for larger companies given setup costs, administration, fiduciary responsibilities, etc.)
We will focus only on the first three, which are generally more suitable for very small businesses—typically, 10 employees or less. Each of these plans has different characteristics—such as the ability to cover employees, contribution limits, and administrative responsibility, to name a few. To choose the right plan for your business, you need to understand the nuances of these plans and match them to your priorities (e.g., higher contributions or simpler administration).
Understanding the differences in the plan types is an important exercise. If you have been operating a plan that doesn’t match your business needs, you could be missing out on important tax benefits, or possibly making mistakes regarding employee contributions.
Why have a small-business retirement plan?
Here are three very compelling reasons:

  • Your plan not only helps secure your future—it may be the primary way your employees can help secure theirs.

  • Offering a plan helps make your business competitive when it comes to attracting and keeping good employees.

  • There are potential tax benefits to offering a plan, because plan contributions for the business owner are deductible as a business expense.

The Lindsey Company

800 Wilshire Blvd.,

2nd Floor,

Los Angeles, CA 90017

Phone. 310-922-9900

Email. lindsey@darryllindsey.com