When it comes to retirement planning for small business owners there are a lot of options available which can be confusing.
There is no one strategy that is perfect for everyone so our goal here is to give you an overview of what’s available to help you make a decision on what you may want to implement in your business.
We partner with Matt Ruttenberg and Life Inc Retirement Services so if you would like to get started on setting up a retirement plan you can email us or visit their site here.
What Is The Goal of A Business Retirement Plan?
Before you think about putting a retirement plan in place you need to think about what your goal is by starting one as that will be a starting point to the best option for YOU. Typically we say you fall into of these (or both):
- Employer looking for their own retirement or tax savings.
- Help recruit and retain high quality employees.
What Retirement Options Are Available On The Personal Side?
Both a Traditional IRA and Roth IRA are options that are available to you whether you are a business owner or not.
- Traditional IRA
- 2022 Contribution Limits:
- $6,000 (If 50 or older: $7,000)
- Starts to phase out at AGI of $68k (Single) or $109k (Married) if you are covered by a workplace retirement plan.
- 2022 Contribution Limits:
- Roth IRA
- 2022 Contribution Limits:
- $6,000 (If 50 or older: $7,000)
- Starts to phase out at AGI of $129k (Single) or $204k (Married).
- 2022 Contribution Limits:
What Retirement Plan Options Are Best For Businesses With No Outside Employees?
If you have no employees you will likely want to focus on one of the two options below.
- SEP IRA
- 2022 Contribution Limits:
- EmployER: $61,000
- Allows the owner to contribute up to 25% of their W2 income. If you are a sole proprietor, the maximum is 20% of net income.
- All contributions are pre-tax.
- Employee contributions are NOT allowed. (employer must do same amount of contribution as their own).
- Learn More Here
- 2022 Contribution Limits:
- Solo 401k (AKA Individual 401k)
- 2022 Contribution Limits:
- EmployEE: $20,500 (If 50 or older: $27,000)
- EmployER: Maximum 25% Match
- Max Between Employee and Employer: $61,000
- Will allow the owner to contribute 100% of their income up to a certain point.
- Allows the company to match your contribution.
- Choice of Pre-tax or Roth Contributions.
- Learn More Here
- 2022 Contribution Limits:
What Retirement Plan Options Are Best For Businesses With Employees?
When you have employees outside of the owners you will want to look into the following options.
- Payroll Deducted IRA
- 2022 Contribution Limits:
- $6,000 (If 50 or older: $7,000)
- Same phaseouts of Traditional IRA and Roth IRA above.
- Gives your company the feel of a retirement plan for your employees, even if you’re not quite ready for a 401k.
- Allows your employees to contribute towards retirement straight out of their paycheck.
- Choice of Pre-tax or Roth contributions.
- Matching contributions from the employer are not required.
- Learn More Here
- 2022 Contribution Limits:
- SIMPLE IRA
- 2022 Contributions Limits:
- EmployEE: $14,000 (If 50 or older: $17,000)
- “Turn-key” matching and vesting options.
- Pre-tax contributions only.
- Your choice of employment qualification into the plan.
- No administration costs.
- Important Deadline: If you want to start a Simple IRA before the end of the year, there is a deadline of October 1st.
- Learn More Here
- 2022 Contributions Limits:
- Safe Harbor 401k
- 2022 Contribution Limits:
- 2022 Contribution Limits:
- EmployEE: $20,500 (If 50 or older: $27,000)
- EmployER: Maximum 25% Match
- Max Between Employee and Employer: $61,000
- 2022 Contribution Limits:
- Allows the owner to maximize contributions without relying on high employee participation.
- “Turn-key” matching and vesting options for easy compliance testing.
- Both Pre-tax and Roth Options inside the plan.
- Important Deadline: If you want to start a Safe Harbor 401k before the end of the year, there is a deadline of October 1st.
- Learn More Here
- 2022 Contribution Limits:
What Advanced Retirement Planning Options Are Available?
- Type of defined benefit plan or pension plan that works best with solo-preneurs or employers with small teams.
- Cash Balance Plans are designed for the highly successful entrepreneur who want, or need, to save a lot more than a traditional 401(k) plan.
- Allows you to contribute up to $300k+ pre-tax while saving you over 6-digits in taxes.
- Basically you are layering a cash balance plan on top of a 401(k) plan & profit sharing.
- Allows you to also recruit top candidates.
- Every single plan is different with a fully custom design and flexibility.
- Learn More Here
On our Tax Minimization Program monthly group training for January 2022 we did a deep dive into retirement strategies. If you are not yet a member there, I highly recommend you join as we touch on this topic yet so many more!
As a reminder, we partner with Matt Ruttenberg and Life Inc Retirement Services so if you would like to get started on setting up a retirement plan (or just looking for a consultation) you can email us or visit their site here.