Your Retirement Plan

When people begin looking for the ideal retirement plan for their needs, one of the solutions that is often requested is simple retirement plans. One example of simple retirement plans is the SIMPLE 401k plan, which is a 401k retirement plan that is the result of a cross between a traditional 401k plan and a SIMPLE IRA retirement plan. Small businesses that have less than a total of 100 employees as well as no other retirement plans in place are capable of being eligible for these simple retirement plans. These simple retirement plans can be offered to any employee aged 21 and older that has been employed for at least a full calendar year. Here are some of the benefits and features that are associated with these simple retirement plans so that you may understand how they compare to traditional 401k retirement plans.

What are the advantages of 401k simple retirement plans? Understanding the advantages associated with these simple retirement plans is the first step to determining whether or not they can benefit you.

Following are some of the advantages associated with 401k simple retirement plans:

- Loans are allowed with these simple retirement plans. This is an especially attractive feature because it allows employees and business owners to borrow from their own funds, making interest and loan payments back to their own accounts. These loans are available not only to simple retirement plans but also to standard 401k plans as well.

- Unlike with traditional 401k plans, there is no testing. These simple retirement plans do not require top heavy, non-discrimination testing, which is much more appealing to small business owners that like the 401k features but cannot afford to pay the administration costs associated with the testing process.

What are the disadvantages of 401k simple retirement plans? Understanding the disadvantages associated with these simple retirement plans is the first step to determining whether or not you will be benefited by them.

Following are some of the disadvantages that are associated with 401k simple retirement plans.

- With traditional 401k retirement plans, employer contributions can be subject to a specific vesting schedule which can reduce employee turnover, but contributions to 401k simple retirement plans on the other hand are 100% vested immediately, meaning that employees that meet the requirements can withdraw all of their money any time they wish.

- The contribution limits are lower for 401k simple retirement plans in comparison to traditional 401k retirement plans.

- 401k simple retirement plans have a one plan limitation, meaning that employers establishing them cannot maintain any other retirement plan at the same time.

401k simple retirement plans are cost effective alternatives in comparison to traditional 401k retirement plans. Administration of these 401k simple retirement plans is simple, they do not require discrimination testing, they offer the ability for you to borrow money from your own retirement account and they have numerous other benefits that make them a worthwhile consideration for you to make.

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SEP retirement plans are also known as Simplified Employee Pension retirement plans. These SEP retirement plans are often touted as being both simple and effective for allowing individuals who are self employed as well as owners of small businesses to save and plan for their retirement. However, when considering SEP retirement plans as one of the options for retirement that are available to you, you should make sure to weigh both the pros and the cons before you actually open up a retirement plan that may or may not meet your needs.

- * One of the biggest perks associated with SEP retirement plans is the fact that your taxable income can be reduced, even at the very last minute. For example, should you be opening up SEP retirement plans in 2008, you are still able to make contributions for the 2007-year. You can open up SEP retirement plans at any point right up until the point of the income tax return.

- * Another benefit that is associated with SEP retirement plans is that the contributions do not necessarily have to be made every single year, and the contributions are made only by the employer. Furthermore, employees that work for employers with high turn over rates are not eligible for contributions to SEP retirement plans. There are also no specific filing requirements for the employer.

- * There are also downsides associated with SEP retirement plans. For example, SEP retirement plans are also required to cover employees working part time, provided that they have worked in three out of the last five years, making $500 dollars annually. If you contribute funds on your own behalf, then you will also have to contribute funds for every qualifying employee to follow the requirements of SEP retirement plans.

- * Another problem that is associated with SEP retirement plans is the tax structure that it follows. The contributions are capable of being tax deductible, but the withdrawals and the earnings are taxed. What this means is that more paperwork will be involved in reporting everything to the Internal Revenue Service.

- * When it comes to delivering solid returns, SEP retirement plans tend to be lacking. The most lucrative type of investment plan out there is a self directed form of the Roth IRA retirement plan. While these Roth IRAs are a solid option for many people, you should not completely rule out the idea of SEP retirement plans until you weigh all of your options equally.

You will be doing yourself a favor by weighing all of your options equally and carefully, including SEP retirement plans and other similar retirement planning options. There are both pros and cons associated with the concept of SEP retirement plans, so weigh them all before you choose or rule out these retirement plans as a possibility. These SEP retirement plans may not be the best solution for everyone, but they may be the right solution for you.

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An SEP retirement plan, or Simplified Employee Pension plan, provides employers an inexpensive and uncomplicated way to make contributions to their employees’ and their own retirement accounts.

With an SEP retirement plan, employers are able to make direct contributions to a traditional IRA on behalf of any employee, including him or herself, up to 25 percent of the pay of the employee.

Many employers and employees consider the SEP retirement plan to be an outstanding option for retirement savings.  Employers like that these plans are so inexpensive to create and operate, with virtually no cost to the employer.

The employer contributions to the plan are completely tax deductible, and there are no taxes on the investment earnings from the IRAs, so there are tax benefits to the employer and the employees.

With an SEP retirement account, the employer has complete flexibility in how much, if and when to contribute to the employee’s retirement. They are not locked into a set percentage or a particular amount. If business is good in a particular year, the employer can give larger contributions, and when things are tight, they can reduce the amount.

There are no complicated forms to file with the government when using the SEP retirement plan. The employee notes the amount on his or her tax return, but the bookkeeping requirements from the employer are, generally speaking, non-existent, making it an excellent choice for small businesses that want to provide some kind of benefit to their employees but are unable to afford the management expenses of a standard retirement fund.

Any kind of business, including partnerships, sole proprietors, corporations and S corporations can set up an SEP retirement plan. Another benefit for employers is that there is an allowance for a $500 tax credit each year for the first three years to offset any costs involved in starting up the plan. Many businesses qualify for this credit.

For an unincorporated business with a self-employed contributor, contributions can be somewhat challenging to figure. The allowable contribution is limited to 25 percent of the business’s net profit, as opposed to the gross income, minus one-half of the required self-employment tax.

For an unincorporated business with a sole proprietor who is paid wages, the allowable contribution is actually only 20 percent, since it is limited to 25 percent of the person’s wages after the SEP contribution is deducted. So despite the relative simplicity of the program, it’s advisable to have expert advice in setting up the plan and figuring contributions.

Incorporated businesses, however, are able to contribute up to the full 25 percent per employee.

With an SEP, all contributions come from the employer, but the employee never has to report them as income. The money in the SEP-IRA, however, immediately belongs to the employee, and will follow the employee if they ever find new employment (the plans are completely portable).

If a company offers an SEP retirement plan, it must offer the plan to all eligible employees who earned at least $500, are 21 years of age or older, and who have been employed by the company for at least 3 of the past 5 years.

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A self-employed individual has several advantages when it comes to planning for retirement. There are several self-employed retirement plan options available to the self-employed, and often these plans allow a higher contribution than the person would be able to save as an employee.

SEP

The SEP is a simple type of self-employed retirement plan that can be used advantageously by the self-employed. Officially known as a Simplified Employee Pension or SEP-IRA, these plans allow a self-employed individual to contribute up to 25 percent of their salary. There are some limitations based on self-employment taxes, etc. that should be considered in determining the actual contributions.

SEPs have some advantages as a self-employed retirement plan. For example, they are fairly easy to establish and fairly inexpensive to operate. They can be opened as late as the day the tax returns for the year are due, and all contributions to them are tax-deductible. It is an easy process to open an SEP, and there are no government reporting requirements.

Keough Plans

Keogh plans are much like IRAs for the self-employed, but they have different contribution limits. They are also somewhat different in terms of how contributions are figured and how benefits are distributed. However, for some self-employed people, the Keough plan makes sense as a self-employed retirement plan.

There are two types of Keoughs: the profit sharing plan and the defined benefit plan. With a defined benefit plan, there is a specific benefit expected and planned for at retirement. The self-employed person needs to hire a management firm to set up the account, and an actuary must do figuring of the benefit and yearly contributions.

Administrative costs can be high - up to several thousand dollars a year - and once the plan is set up, there is no option of not contributing to it. The advantage to the Keough is that a person may be able to make higher contributions to the plan if they want a high guaranteed benefit after retirement. These plans, then, make the most sense for people with a higher income and who are closer to retirement.

Self-Employed 401(K)s

A self-employed business owner with no employees other than a spouse is eligible to open a self-employed 401(K) account.

Some businesses find this option preferable to the SEP or Keough self-employed retirement plan because of the higher contribution allowances and tax advantages. A financial planning company will help set up a 401(K) for the self-employed. The 401(K) allows elective deferrals that are not taxed, and that are not allowed with an SEP.

Roth IRAs
Self-employed individuals can take advantage of Roth IRAs as a supplement to any other self-employed retirement plans that they have. The Roth IRAs do have contribution limits, and contributions are taxed at the current rates. However, the withdrawals are not taxed, along with the original investment nor the growth in the investment, so they can be a very good idea for many people, including the self-employed.

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There is a type of 401k plan known as safe harbor retirement plans, which are a valuable investment for any employee that is looking to invest as much money as they possibly can into their retirement planning fund. These safe harbor retirement plans are especially beneficial for workers who are older, and who are especially concerned about having enough money when the retirement age rolls around. This is because these safe harbor retirement plans allow them to invest as much or as little of their income as they want into their retirement plan. The rules and guidelines that are required to be followed regarding how much income can be invested and how much needs to be matched by an employer can become rather confusing for many people, but it is well worth it to learn all of the ins and the outs that are associated with these 401 k safe harbor retirement plans so that you can effectively boost your retirement savings quickly and effectively.

These 401 k safe harbor retirement plans allow for workers to invest as little or as much of their earned income as they like, even if they decide that they want to invest 100 percent of their earned income into their 401 k safe harbor retirement plan. These are caps placed on the total amount of money that can be contributed to 401 k safe harbor retirement plans, however the amount is more than $40,000 dollars per year, and this amount is regularly adjusted to accommodate inflation and other such issues. If you are planning to invest 100% of your income into one of these 401 k safe harbor retirement plans, you are going to want to determine what the current allowed amount is when you start the account, so talk to a financial planner if you are not certain.

While all 401 K plans are capable of allowing contributions to be matched by employers, 401 k safe harbor retirement plans require that they always match at least part of whatever the employer is putting in. In general, the employer is required to match a total 100 percent of the first 3 percent that is contributed by the employee, in addition to 50 percent of the next 2 % of money contributed. There is also an option with 401 k safe harbor retirement plans that allows employers to always put in 3 percent of the contributions made by their employees.

If you have any concern that you may not be financially prepared for a comfortable retirement, then 401 k safe harbor retirement plans could potentially be a really beneficial investment for you to make in regards to your future. This is even more true if you are closing in on your retirement age, and want to boost your savings as quickly as possible in as short a period of time as possible. If you want to divert more immediate income into your retirement, then 401 k safe harbor retirement plans are a really good avenue for you to pursue.

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Are you running a small business? Do you already have a small business retirement plan in place? One of the major issues that face business owners and business operators is issuing retirement funds. Retirement age may seem pretty far off right now, but exploring retirement plans for small business is something you need to do when you are forming your small business rather than after the fact. You may think that it would be ideal for you to set the business up first and then to think about retirement plans for small business later, but nothing good will come of being ill prepared. What is your retirement plan?

Retirement plans for small business come in a variety of different flavors, and there are some pretty serious considerations that you need to make. Most people simply put retirement plans for small business to the back burner because there are so many other things that need to be done in the management of a small business. You may be experiencing hiring problems or cash flow problems, but this doesn’t give you a real excuse to avoid exploring your options regarding retirement plans for small business. When it comes to retirement plans for small business, you need to start putting money aside as soon as you can, and you need to start exploring your options so that you can set up your retirement plan as soon as possible.

When it comes to retirement plans for small business, you should check with the laws and policies within your country, state and even city depending on where you live. Once you know what types of retirement plans for small business are available in your area, and even more importantly, what types of tax breaks and other incentives are offered to businesses that obtain insurance, you can start forming your own retirement plan.

If time is one of the limiting factors that is making it difficult for you to peruse retirement plans for small business, then you may want to sit down and discuss the situation with a financial planner. By working with a financial planner, you will be able to figure out a lot more about retirement plans for small business and what options are available to you. You should try to talk with several different financial planners so that you can make sure that the advice that is given to you is consistent. When visiting financial planners, always ask yourself why he or she would still be working if they were so good at financial planning.

If you have the time and the money to get some planning underway, then it would be smart for you to start exploring retirement plans for small business. The options available to you regarding retirement plans for small business are virtually unlimited, if you are willing to explore them. It may be worthwhile to really feel out the options that are available to you until you settle on a retirement plan that corresponds well with the expectations for your small business.

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There are a wide variety of different retirement plans out there, including retirement plans for self-employed individuals for example. These retirement plans for self-employed individuals are specifically designed to cater to people who are independent contractors or otherwise self-employed. There are a number of different profitable options when it comes to retirement plans for self-employed individuals. While there are a lot of retirement plans and accounts that remain completely dormant, it is possible to find retirement plans for self-employed individuals that are constantly earning returns in order to benefit you in the long run.

The majority of people, including those who are self-employed, only get small returns on the retirement funds that they have set up. There are two factors that make this happen: First and foremost, most people are not aware of the options available for retirement plans for self-employed individuals, such as self directed Roth IRAs, which are individual retirement accounts. Secondly, the people that do know which avenue to take often are hesitant to go for a self directed Roth IRA because they are not sure whether or not they will get a solid return on their investment.

Things really aren’t as difficult as they seem when it comes to retirement plans for self-employed individuals. It is actually quite simple to get a higher return on your investment, provided that you choose the correct investment vehicle. When it comes to retirement plans for self-employed individuals, there are a wide variety of options available to you, including the following:

One of the biggest advantages associated with being self-employed is that you can take care of yourself however you need. Since you own the company and you are responsible for all of the decisions, you probably have a natural leadership characteristic. Among the many retirement plans for self-employed individuals, one of the best is a Roth IRA. With a Roth IRA account, you will not have to pay out for taxes on the income that you earn. This is a really big advantage for most self-employed individuals. The contributions that you make to your account are not going to be tax deductible, however.

The availability of retirement plans for self-employed individuals is good, and there are plenty of options for you to choose from. Consider contributing after-tax income to your account, investing it in a profitable but safe market such as real estate as an example. Your money will continue to grow over time, and you will receive higher and higher returns. When you finally do withdraw the money from your account, you will have a considerable amount of money, and you will not have to pay any money in taxes. This is an excellent example for why retirement plans for self-employed individuals are simple to understand, simple to follow, and also quite capable of being profitable for you.

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Some people are led to believe that there are a limited number of retirement plan types to choose from, and they make the wrong decisions regarding their retirement accordingly. Most people do not understand how many different retirement plan types there are out there, and this causes them to have trouble selecting the right retirement plan types for their needs. With so many different retirement plan types out there, however, your options are far less limited than you may previously have believed. Now is the perfect time for you to consider all of your different options regarding retirement plan types so that you can make educated and informed decisions about your retirement now, rather than when it is too late.

When a person is working on planning his or her retirement plan, they are probably working on saving money in any way possible rather than exploring how money can be made through the various retirement plan types. Some retirement plan types are designed to offer high returns, while some offer small returns, and some retirement plan types offer barely any return at all. If you want to enjoy your retirement by planning ahead and getting the most out of the retirement plan types that you choose, then you need to weigh your options now rather than allowing yourself to be disappointed in the end. One of the best retirement plan types that you can choose from is the IRA or Individual Retirement Plan, which tackles a lot of your financial worries by offering unique benefits including tax deductions for example.

There are several retirement plan types to choose from when it comes to buying into retirement plans in the United States. The most popular of these retirement plan types is the IRA, and there are numerous IRA retirement plan types to choose from as well. The most traditional IRA is a savings plan for retirement linked up to a financial institution, brokerage, bank or some other custodian. Your job is simply to deposit money on a regular basis, and then the custodian will be responsible for investing your contributions so that you can earn a return. There are a number of retirement plan types that fit this basic concept, each offering its own unique benefits and drawbacks.

Another of the popular retirement plan types is the Roth IRA, which is similar to the traditional IRA and yet completely unique in its own right as well. This is a popular United States based retirement plan type that allows you to invest into securities and stock to provide a much higher potential return. One of the disadvantages associated with these retirement plan types is that your contributions are not tax deductible in any way. If you decide to withdraw your funds from retirement plan types like these, you may incur a 10 percent penalty tax as a result.

Weigh all of your options regarding different retirement plan types before you buy into one over the other, because there are plenty of options for you to choose from.

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Supplemental executive retirement plans, also known as SERPs, are non-qualified retirement plans for pivotal executive employees. Unlike non-qualified deferred compensation plans, which are funded by employee contributions, SERPs are fully funded by the employer and are considered supplemental retirement income plans that are in addition to traditional 401(k) plans, IRAs or other retirement plans, particularly as pension benefits are lowered and plans become more and more complex.

Many companies consider their top executives to be their largest asset and so consider contributions to a SERP to be an excellent investment in ensuring their top executives remain with their company. Additionally, companies offer SERPs as employment incentives to attractive potential employees as a recruitment tool. Usually, SERP contributions are tied to performance and the meeting of certain requirements. Income contributed to the SERP by the employer is deferred until such time as the employee withdraws the income, when the income is subject to current federal and state income taxes.

How Supplemental Executive Retirement Plans Work

Usually, the company purchases a cash value life insurance plan on the key executive and pays the monthly premiums. The company owns the policy and is the beneficiary until the executive retires, at which time the company receives tax benefits. At that time the retiree receives payments based on the SERP agreement and if the executive dies, the policy is paid to the company, which can continue making supplemental income payments or a lump sum payment to the family.

Corporate Advantages

Supplemental executive retirement plans can offer excellent advantages to companies seeking to retain or recruit top-level executives. They require no Internal Revenue Service approval and are fairly easy to set up and administer.

In addition, companies can determine how they want to reward their key professionals and by how much. Additionally, the company holds the value of the compensation plan until the employee retires or ends their employment. Since the insurance policy continues to grow in tax-deferred value, companies can structure the SERP to recoup associated costs.

Employee Advantages

Since SERPs are fully customizable, executives can negotiate plans, which meet both their needs and the needs of their employers. Supplemental retirement income can accumulate without incurring any tax burden. Finally, if the executive dies, the family receives the benefit of the life insurance policy.

Disadvantages
Unfortunately, companies do not receive any tax benefits until payments are paid out to the employee at retirement. Additionally, since the funds are captured in a life insurance policy rather than in a protected formal retirement plan like a 401(k), funds are not protected from creditors should the employer file for bankruptcy or have cash flow problems.

Supplemental executive retirement plans are excellent rewards and incentive plans for key, top level corporate executives. Using a SERP, a company can provide retirement income for their top employees without incurring any tax burden for that employee and ensure the employee’s family receives a long-term benefit if they die.

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If you are self-employed and considering putting together a retirement plan for yourself, here are some of the options available.

Keogh Retirement Plan

Keogh retirement plans have been around since the 1960s and are designed to provide tax benefits similar to those offered by larger companies and traditional pension plans. If you are the sole proprietor of a business or are an active partner in an unincorporated business, you may be eligible for a Keogh retirement plan. Annual contribution limits are generous, however, check with your tax advisor and a financial planner with experience setting up Keogh plans to find out if you qualify and to help you structure your plan correctly.

Simplified Employee Pension (SEP) Plans

Simplified employee pension plans are extremely easy pension plans to create and maintain. For the busy self-employed professional, this is a definite plus, since they can be created as late in the tax year as the extended due date of your tax return.

Annual contributions are limited to up to 20% of your annual self-employment income or 25% of salary, if you are an employee in your own corporation. Contribution amounts can vary each year and your maximum contribution can be up to $46,000. SEPs are much easier to administer and start than Keogh plans, and usually be as easy as talking to a bank administrator.

Solo 401(k)

With a solo 401(k) retirement plan you can contribute up to 100% of the first $15,500 of your self-employment income. This amount goes up to 100% of $20,500 if you will be age 50 before year-end. Additionally, you can contribute up to 20% of your self-employment income, up to a maximum of $46,000 or $51,000 if you will reach age 50 before year-end. However, you must establish your solo 401(k) plan prior to the tax year end in order to claim any deductions or contributions made to this plan.

The great benefit to this plan is that with high contribution limitations, you can significantly lower your tax burden and defer it until you withdraw the income at retirement.

If You Have Employees

If you have employees, you’ll have to offer them coverage for any SEP, Keogh or 401(k) retirement plan you put in place. You will likely have to make contributions that do not only benefit you and with SEP retirement plans, contributions are immediately 100% vested. Keogh retirement plans and 401(k) plans can be very complicated with employees. If you are considering one of these plans for your employees, consult a financial advisor before announcing it to your employees.

Regardless if you have employees or not, setting up a retirement plan for yourself if you are self- employed makes good business sense. Not only are you deferring tax obligations for yourself, but you are also providing for income for your retirement years.

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