One of the easiest retirement plans to set up is the Simplified Employee Pension plan or SEP IRA. This type of plan is ideal for anyone self-employed or a business that has just a few employees. SEP IRAs allow you annual tax-deductible contributions of 20% of your self-employed income or 25% if you are an employee of your own corporation up to the limits for that year. Flexibility around the amount and timing of your contributions is also a perk of this plan if your profits fluctuate from year to year. A SEP IRA can be opened quickly through most brokers with very little paperwork.
The Solo 401k is the best choice if you are looking to save as much money as possible. It allows you to contribute more money than the SEP IRA and to include your spouse in the plan as long as they are an employee of the business. The employee and the business can both fund the Solo 401k. As an employee of your business you can contribute up to the annual 401k contribution limit. Anyone 50 years old or older can make a catch up contribution as shown below. In addition your business can make annual tax-deductible contributions of 20% of your self-employed earned income or 25% if you are an employee of your own corporation up to the max allowed limit for the year.
If you also have a regular job that offers a 401k in addition to running your business you can contribute to both the 401k and the Solo 401k but the combined total cannot exceed the max limit for the year. Most brokerage firms can set up a Solo 401k with applied administrative costs.
||Catch Up Contribution (Age 50+)||Max Limits w/ Employer Contribution|
|2015||$18000||$6000 ($24000 total)||$53000 ($59000 w/ catch up)|
|2014||$17500||$5500 ($23000 total)||$52000 ($57500 w/ catch up)|
Simple IRAs or Savings Incentive Match Plans for Employees are ideal for small businesses with less than 100 employees. Employees can contribute up to $12000 per year through the Simple IRA. The employer is required to make a matching contribution of up to 3% of each workers annual compensation. Catch up contributions are also allowed for employees who are at least 50 years old.
Simple IRAs (Savings Incentive Match Plan for Employees) are ideal for small businesses with less than 100 employees. It’s easy to set up a Simple IRA with low administrative costs and no IRS reporting requirements.
|Tax Year||Contribution Limits
||Catch Up Contribution (Age 50+)|
|2015||$12500||Additional $3000 ($15500 total)|
|2014||$12000||Additional $2500 ($14500 total)|
Keogh or Qualified Plans
Keogh plans are ideal if you have employees and require a more advanced retirement plan but are more complex and have more stringent reporting requirements. They do offer more possibilities including profit-sharing plans defined benefit plans and money purchase plans.
Which Retirement Plan is Right for You?
Choosing the best plan for you or your small business depends on your situation and the growth goals you hope to achieve. Lindemeyer CPA can help you target those goals and find a retirement plan that fits your needs completely. For more information on Retirement Plans or how to select a plan that fits your individual needs click here to schedule an initial consultation and we will help you narrow down all of the information you need to get started.
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