There are various retirement plans for small business owners that are available at the present time. These retirement plans are implemented for the small business workers for the purpose of providing retirement benefits to them. They include Simple IRAs, SEP IRAs, Simple 401(k) plans and others.
About Retirement Plans for Small Business Owners
The retirement plans for small business owners function as a source of benefits both for the small business owners and the small business workers. These plans are available in different forms. In a number of developed countries, utilizing retirement plans for the workers of small businesses is a mandatory requirement.
The features of the retirement plans for small business workers differ according to the amount of contribution, the participation of the owners and employees, the contributions made by the owners on behalf of the workers, the deadline for depositing the money, and the feasibility of carrying out the plans. These plans are also known as small business retirement savings plans.
These plans are advantageous in that they offer tax benefits to both employees and employers. With the help of a small business retirement savings plan, the small business workers are able to save for contingency purposes in the future.
These plans can also assist a small business owner in retention of his skillful employees and in this way; significant savings in business tax can be made. In addition, the small business owner can also insure his own retirement.
Forms of Retirement Plans for Small Business Owners
The retirement plans for small business owners can be categorized into the following forms:
Simple IRAs: Small business owners with lower than 100 workers can select this plan. Through this plan, up to 10,000 U.S. dollars can be saved every year by the employees and the owner in terms of their own money
SEP IRAs: This plan is also known as the Simplified Employee Pension IRA. The most significant difference between the Simple IRA and this plan is that this plan is wholly financed by the employer
Simple 401(k) Plans: There are numerous similarities between Simple IRAs and Simple 401(k) plans. The same restriction of 100 employees is applicable and so is the restriction of 10,000 U.S. dollars on contributions from employees
Profit Sharing Plans: Similar to SEP IRAs, profit sharing plans are usually financed by the employer
Single-participant 401(k) Plans: With the help of these plans, the small business owners excluding the employees (apart from the spouse) are able to reap the benefit of the upper limits that are permissible under the 401(k) plans