Financial Calculators and Articles - Choosing a Retirment Solution for Your Small Business

As of 2-22-25

When selecting a retirement plan for your small business, consider the following options, their features, benefits, and key considerations:

Common Retirement Plans

1. Simplified Employee Pension (SEP) IRA

Description: Allows taxdeductible contributions for owners and employees.
Contribution Limits: Up to 25% of employee compensation or a maximum of $66,000 (2023).
Advantages: Easy setup and flexible contributions.
Considerations: Requires equal percentage contributions for all employees.

2. Savings Incentive Match Plan for Employees (SIMPLE) IRA

Description: Best for businesses with fewer than 100 employees; allows employee and employer contributions.
Contribution Limits: Employees can contribute up to $15,500 (plus catchup contributions).
Advantages: Easy to administer, encourages employee savings.
Considerations: Employer must contribute, which can be a financial commitment.

3. 401(k) Plan

Description: Allows higher contributions from both employers and employees.
Contribution Limits: Employees can contribute up to $22,500 (plus catchup contributions), with total contributions capped at $66,000.
Advantages: Higher limits, various investment options.
Considerations: More complex and costly to administer.

4. ProfitSharing Plan

Description: Employers can contribute a portion of profits to employee accounts.
Advantages: Flexible contributions based on profitability.
Considerations: Contributions can vary each year.

5. Defined Benefit Plan

Description: Guarantees a specific monthly benefit at retirement.
Advantages: Provides predictable retirement income.
Considerations: Complex and costly to administer.

Key Considerations

Business Size: Choose a plan that fits your workforce size.
Complexity: Consider how much administrative effort you can manage.
Cost: Evaluate setup and maintenance costs.
Employee Needs: Assess employee participation preferences.
Tax Implications: Understand how contributions and withdrawals affect taxes.
Flexibility: Ensure the plan can adapt with your business growth.

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