Whether you’re managing 60 full-time employees or a five member part-time staff, chances are there isn’t enough time in the day to spend working on a retirement plan, a succession plan or other ways to make your business work better for you and your family.
We have the knowledge and experience you need to create and execute simple solutions to the unique challenges a small business owner faces in planning for their retirement and protecting their family and investment.
As an extremely busy small business owner or self-employed professional, you know how valuable your time is and you recognize the importance of having the right people in place for the task at hand. You should have a plan that takes into consideration all of your unique financial, tax, personal and business variables.
Call us if you need an advisor specializing in financial planning for small business and you are struggling to identify and develop a strategy for your retirement, investment and college funding goals. Rather than lamenting about when you will “find the time” to figure it out yourself, your real focus should be on finding a financial advocate to help you create and execute a retirement plan that is effective and simple to operate.
Our strong hunch is…
Getting the dollars in the door and managing the day-to-day process of running your own business can seem all consuming. So while you’re fixed on applying your core strengths to achieve your present goals, we’ll focus on planning for your future lifestyle dreams.
Our comprehensive suite of services and experienced associates are adept at high levels of service so your precious time can be spent making money or with your loved ones. We will help you choose simple and flexible solutions that seek to minimize your time and attention.
To support you in determining whether we are a good fit for your small business, please contact us about qualifying for a complimentary review of your overall financial situation.
Is your current retirement plan the most efficient and beneficial for your company and employees, or are you’re considering adding a new plan? As Retirement plan specialists, Life Planning Institute can help.
Even in the best of times, finding and retaining qualified and talented employees is a challenge for business owners. The best managers seek to motivate those employees, demonstrate to them the advantages of working for a profitable business, and build a sense of community among staff.
Defined Contribution Plans, like 401(k) plans, can help with these goals. Defined Benefit Plans, or pensions, can also be a rewarding tool to help the company maximize benefits and build a team with long-term vision. A happy work force and profitable business go hand in hand.
Pensions and 401k plans also offer the appealing benefit of potentially allowing employees and owners to keep more of their hard-earned money.
The challenge for any business is the cost of administering these plans. We specialize in cost-benefit analysis and will make sure you have the ability to make an informed decision based on relevant and timely information.
It used to be that small businesses couldn’t afford to offer retirement plans for their employees. The cost was too high, and the offerings for small businesses were few and far between. That has changed in the past few years, with more companies offering micro-retirement plans.
We work with leading actuaries and record-keepers to help establish administrative processes specifically designed to support small- to mid-size businesses.
We make it easy for you to offer attractive benefits. If you’re a typical small-business owner, you know how much you juggle at once. Not only must you perform exceptionally in your chosen occupation, but you also must take care of all of the technicalities involved in running a small business. Hiring employees can take some of that burden off your shoulders, but employees also bring a host of additional legal requirements into play.
With the many responsibilities that business ownership entails, it’s easy to understand why retirement planning often gets placed on the back burner.
Yet business owners are uniquely placed to take advantage of some retirement-plan options that aren’t available to most employees. And a good retirement plan can not only attract faithful employees, but also make it easier for business owners to achieve their own personal financial goals
Your many options
Several retirement plan options exist for small-business owners. They vary regarding how much money can be contributed; whether employees other than the owners may participate; what (if any) contributions the employer must make on behalf of employees; deadlines for creating and putting money into the plan; and degree of difficulty in administering the plan.
Among the options small businesses commonly use are SIMPLE IRAs, SEP IRAs, profit-sharing plans, SIMPLE 401(k) plans, and single-participant 401(k) plans.
Congress likes acronyms, so it picked the name “Savings Incentive Match Plan for Employees” to spell the word “simple.” Employers with fewer than 100 employees can choose this option. Simple IRAs allow the owner and any employees to save up to $10,000 per year, indexed for inflation, of their own money; if an employee is older than 50, an additional “catch-up” amount of $2,500 may also be allowed.
The employer must generally contribute either an additional 2% of each employee’s compensation to the plan, or match 100% of each employee’s contribution up to 3%; additional employer contributions are not allowed.
SIMPLE IRAs typically have a lower cost compared with other plan options. And as the name suggests, administering SIMPLE IRA plans is relatively easy. However, if you choose this option for your business, you are not allowed to set up any additional type of retirement plan.
The Simplified Employee Pension IRA features some significant differences from SIMPLE IRAs. Perhaps the biggest difference is that the employer funds the SEP IRAs entirely (the employee does not contribute). The employer may contribute up to 25% of the employee’s compensation to the plan, up to an overall maximum of $42,000 per employee (indexed for inflation).
Business owners also have extra time to set up a SEP IRA; the deadline is the same as the deadline for the business income tax returns, which means that a business operating on a calendar year basis would have until March or April of the following year to set up a SEP IRA.
SEP IRAs are also fairly easy to administer, and can be very cost-competitive.
Like SEP IRAs, profit-sharing plans are generally all employer-funded. The same 25% contribution limit exists, although the per-employee limit is $44,000 rather than $42,000.
Unlike the other plans discussed previously, the employer contributions to profit-sharing plans do not have to vest immediately. So if an employee leaves the company before a designated period of time passes, that employee may forfeit contributions the employer made on the employee’s behalf.
Because profit-sharing plans allow for this added complexity, costs may be higher than for other plans, and some administrative tasks may be more burdensome or require professional assistance. The advantage for the employer is the potential for long-term employee motivation offered by this form of compensation.
SIMPLE 401(k) plans
SIMPLE 401(k) plans share many similarities with SIMPLE IRAs. The same 100-employee limit applies, as does the $10,000 limit on employee contributions. The employer also has the same choice between contributing 2% of compensation (salary) or matching up to 3% of the employee’s contribution.
The differences are relatively minor. The guidelines for how and when a new employee qualifies for the plan are slightly different, and there are some small variations in the amount that highly compensated employees can receive in employer contributions.
Perhaps the biggest difference is that SIMPLE 401(k) plans can include provisions that allow employees to take loans against their account balances—that’s not an option with SIMPLE IRAs. In addition, business owners must file an information return with the IRS.
Working with some of the largest and most comprehensive defined contribution plans, Bedrock Investment Advisors offers 401(k) plans designed to be the low-cost retirement solution for small businesses.
Single-participant 401(k) plans
These plans allow business owners without employees (other than a spouse) to take advantage of the higher limits that 401(k) plans allow. By using a single-participant 401(k) plan, a business owner can choose to save $15,000 per year, plus an additional $5,000 for owners older than 50. In addition, the business can make a tax-deductible employer contribution on the owner’s behalf of up to 25% of compensation. The total contributions cannot exceed $44,000, indexed for inflation.
A business owner must create the plan before the end of the year but may be able to wait until the tax-return deadline to make deposits. In some circumstances, an IRS information return may be required.
Because the single-participant 401(k) is somewhat more complicated than SIMPLE and SEP-based plans, not as many providers offer them, and the costs can be somewhat higher. However, the higher contribution limits may mean that potential tax savings more than make up for any additional costs. Bedrock Investment Advisors, LLC can help you determine which plan best fits your individual circumstance.
While this list of retirement-plan options is not exhaustive, we hope you will find that it offers a solid overview of the range of alternatives available to small-business owners.