Retirement Plans – Choosing the Right Plan for You
The ﬁrst thing to consider when you are trying to choose a retirement plan for your business is yourself—your ﬁnancial situation, your goals, your age.
After all, this is your company, and you deserve to reap ﬁnancial beneﬁts.
Ask yourself why (despite the administrative and fee-oriented drawbacks) you want to start a company retirement plan.
Think about the following rea- sons, and rank them in order of importance to you:
- To save for your retirement
- For the tax advantages, which let you save more money than you could without the plan
- To attract the best candidates with a competitive employment package
Even if all these reasons are important to you, try to ﬁgure out which takes priority. Different priorities will steer you toward different plans; after all, that is precisely why there are so many choices. Once you’ve settled on your goals, there are still a few other factors that will inﬂuence your choice. The ﬁrst is your entity; some plans are only allowed for certain business structures. Then come simplicity and cost; as you might expect, some plans are easier to deal with than others, and some are cheaper to implement and administer.
Although your particular situation is unique, there are some general rules you can use to guide you in making your decision (and consulting a qualiﬁed professional couldn’t hurt). If your goal is to save as much for your retirement as possible, look at Keogh (for noncorporations) or proﬁt-sharing (for corporations) plans. If simplicity and cost are key factors, consider SEPs and SIMPLEs. For companies with variable proﬁts, proﬁt-sharing types of plans allow the most contribution ﬂexibility. And if it’s just you, and you want to sock away some cash for retirement without the hassle of a full- ﬂedged pension plan, open an IRA.