Now that you’ve secured the best credit cards for your small business and determined the best health care plan for you and your employees, it’s time to start thinking about long term financial planning. Retirement plans for your agency- or any small business- is an excellent vehicle to sock away money for your golden years and provides the same for the employees who have helped you build your company.
President of ShareBuilder Advisors, LLC Stuart Robertson is also a contributing writer for Forbes.com and summarizes the three best plans for small businesses:
THE 401(k)
Perhaps the most recognized of all the investment plans, the 401K is the most utilitarian tool available to business owners and their employees. In their Guide To Your 401(k) CNNMoney.com explains that the 401(k) is “a way to reduce your taxable income since contributions come out of your pay before taxes are withheld; many plans include a matching contribution from your employer; and the money you save benefits from tax-deferred growth, which lets your money compound more quickly than it would if it were taxed yearly.”
It’s also the most customizable- employers can choose to match what their employee saves, provide vesting options or provide access to funds penalty-free if an emergency arises. For those who have a tighter money-management style, contributions into a Roth 401(k) are taxed upfront so that withdrawals in retirement are completely tax free.
THE SIMPLIFIED EMPLOYEE PENSION
SEPs, or Simplified Employee Pensions, are different from SIMPLE IRAs in that 100 percent of the contributions made are by the employer and these dollars are immediately vested for the employee. They have similar rules as the 401(k) in terms of contribution limit but aren’t subjected to the same IRS tests and reporting that 401(k) plans do.
THE SIMPLE IRA
Another plan that frees the employer from IRS tests and reporting requirements is The Savings Incentive Match Plan for Employees. This plan offers contributions from both the employer and employee, however the employer must match and matching is vested immediately. One slight detraction from its popularity is that the employee contribution limit is significantly lower than both the 401(k) and the SEP.
Planning for your retirement is an important step in establishing your company’s financial health. If you would like more information about planning to profitably exit your nanny agency, download the INA’s new Nanny Agency Exit Strategy Guide.
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INA’s Latest Publication & Conference Details
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Other Posts in the Series:
Best Practices for your Nanny Agency: Part 1 Financing Solutions
Best Practices Part II: Health Care Planning For Your Nanny Agency