The variety of retirement planning options available to you as a business owner

Retirement Plan

On the chart below, you can find details about retirement plans that may suit you. Ultimately the ideal retirement plan for you is determined by a dynamic set of variables, and this chart is meant to demonstrate the variety of retirement planning options available to you as a business owner. Before implementing any plan, consider consulting with your tax or legal advisor.

Plan	Details	Maximum Annual Contribution	Taxes and Withdrawals	Administration	Number of Employees
Payroll Deduction IRA	An IRA-based plan that allows employees to contribute an amount determined by them each pay period	$5,000, with catch-up contributions of $1,000 for those 50 and over	Withdrawals are permitted at retirement age (59½) and are taxed as ordinary income. Early withdrawals are subject to taxes plus penalties.	Easy to set up and maintain. Only employees contribute.	Any employer with one or more workers
Simplified Employee Pensions (SEP)	An IRA-based plan with a greater maximum contribution than a Payroll Deduction IRA	The lesser of 25% of pay or $49,000	Withdrawals are permitted at retirement age (59½) and are taxed as ordinary income. Early withdrawals are subject to taxes plus penalties.	Easy to set up and maintain. Employer can opt to contribute a uniform percentage of pay for each employee, but not required to contribute each year. Only the employer can contribute.	Any employer with one or more workers
Simple IRA	An IRA-based plan that allows employees to contribute a percentage of their salary and requires employer contributions	$11,500, with catch-up contributions of $2,500 for those over 50	Withdrawals are permitted at retirement age (59½) and are taxed as ordinary income. Early withdrawals are subject to taxes plus penalties.	Bank or financial institution handles most of the administration and there is no annual filing requirement for employer. Employer must contribute, but they can opt to match employee contributions or contribute 2% of pay.	Any employer with 100 or fewer employees
Traditional 401(k)	A savings plan that allows employees to defer a portion of their pay and place it in a plan administered by the employer	$17,000, with catch-up contributions of $5,500 for those over 50	Withdrawals are permitted at retirement age (59½) and subject to ordinary income tax. Plan may permit loans and early hardship withdrawals, and may be subject to taxes and penalties.	401(k) plans vary greatly in their complexity and are administered by the employer. Annual filing is required and some plans have other requirements. Employer may contribute according to the terms of the plan.	Any employer with one or more workers
Profit Sharing	A plan allowing large discretionary contributions from the employer	The lesser of 25% of compensation or $50,000, according to terms of plan	Withdrawals are permitted at retirement age (59½) and are taxed as ordinary income. Plan may permit hardship withdrawals, but most withdrawals are subject to taxes and penalties.	Profit-sharing plans vary greatly in their complexity and are administered by the employer. Annual filing is required. Employer contributes significant amounts.	Any employer with one or more workers

Looking at this chart, we can pull out a few questions that may help you decide which direction to go.

• How many employees do I have? As you can see, all of the plans will work for a single owner operator up to an organization with any number of employees. Only the Simple IRA caps at 100 employees.
• Will my income be predictable? If it won't be when you start up or isn't currently, plans like the Payroll Deduction IRA, the SEP and profit sharing allow employers to be flexible with how much they contribute based on annual cash flow.
• Do I have resources for administration? Profit sharing and 401(k) plans are more complex to set up, usually requiring the assistance of a financial institution or other advisor. They also require annual reporting to the IRS, whereas the IRA-based plans are established with a few forms and operate without significant administration.

Learn more: www.learnvest.com/bootcamp