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I Own a Small Business or am Self-Employed – What are My Retirement Plan Options?

October 4, 2012

As an employee of a large corporation, you most likely have a retirement plan option provided to you that is sponsored by your employer. On the other hand, if you are a small business owner or self-employed, you make think your options for a retirement account consist of simply the traditional IRA and the Roth IRA. However, you may have more options than you think. Consider the following choices as you make your investment decisions.

SEP IRA: With a SEP IRA, the employer (instead of the employee) makes all contributions. If you are a small business owner with few or no other employees, this may be an ideal option for you because you can make annual tax-deductible contributions of 20% of your earned self-employed income or 25% if you’re an employee of your own business up to $50,000 per year.

SIMPLE IRA: If your small business has 100 employees or less, a SIMPLE IRA can be an attractive substitute to a 401(k) plan. Unlike with a SEP IRA, the employee is the primary contributor to a SIMPLE IRA. A SIMPLE IRA encourages employees to take an active role in their retirement savings because the employer is required to match the contribution made by the employee up to 3% of their compensation.

I401(k): An individual 401(k) plan is an appealing option for a small business with multiple owners who work for the business, or for the solo practitioner. Not only does this retirement plan allow the employee to fund the 401(k), but also it enables the employer to make a profit sharing contribution. Other advantages of an I401(k) plan include the ability to accelerate contributions, to contribute on a pre-tax or post-tax basis, and to take a loan up to $50,000 from the plan.

Saving for retirement doesn’t have to be a challenge for the small business owner. Take the time to explore and understand your options because the right one will depend on the strategies and growth goals of your business. Contact our Florida IRA administration company to learn more about the many ways you can invest in your retirement. Give us a call today at (407) 367-3472 to find out all the options available to you!