There are several ways to plan for your retirement and having a life insurance that builds cash is one way. However, when it come to your business, It doesn’t matter if you have no employees, 1 employee, 2 employees (husband and wife), 10 employees or 100 employees, there are a variety of plans designed to meet your needs, size and type of business.
A Solo 401(k), (also known as a Self Employed 401(k) or Individual 401(k)), is a 401(k) qualified retirement plan for Americans that was designed specifically for employers with no full-time employees other than the business owner(s) and their spouse(s). Self-employed workers who qualify for the Solo 401(k) can receive the same tax benefits as in a general 401(k) plan, but without the employer being subject to the complexities of ERISA.
Simple IRA (Employers with 1–100 Employees)
Ideal for business owners with 100 or fewer workers who would like their employees to share responsibility for their own retirement savings, but who don’t want the complexity, cost and administration of a 401(k). Such businesses include retail stores, restaurants, professional firms, small firms, freelancers, independent contractors, part-timers and individuals who earn any self-employment income, from activities outside of their full-time jobs. Individual employees can defer the maximum amount, regardless of the amounts deferred by other employees.
SEP IRA (Any Size Employer)
Ideal if you’re a self-employed individual or small business owner who wants a simple, easy to
administer plan that allows you to make annual discretionary tax-deductible contributions to a
retirement plan. For each participant, employers are permitted to make annual tax-deductible
contributions of up to the lesser of $55,000 (2018) or 25% of compensation. Simple to establish and maintain; no government reporting.
401(k) (Any Size Employer)
Traditional 401(k) plan designed for businesses of all sizes that wish to have their employees share responsibility for retirement savings. With features such as availability of loans and hardship withdrawals, the 401(k) is one of the most flexible retirement plans available. As a result of these extra features, 401(k) s requires more administration than other plans. Allows employees to make annual pre-tax, salary deferral and/or Roth after-tax (optional) contributions of up to $18,500. In addition, catch-up contributions limited to $6,000 may be offered to participants age 50 and above.
Profit Sharing (Any Size Employer)
If you like the features of a SEP IRA, but want more control over your plan’s eligibility and vesting, and don’t mind some additional administrative responsibilities, a traditional Profit Sharing plan may be a good choice for you.
Profit Sharing plans may be suitable for businesses with unpredictable earnings as well as those with part-time employees and/or high employee turnover. Annual contribution percentage may vary; contributions may even be skipped altogether. Employer is allowed to make a tax-deductible contribution of 25% of eligible payroll paid during the year to the participants under the plan. Overall maximum contribution per eligible employee is 100% of compensation not to exceed $55,000, based on the first $275,000 of compensation.
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