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Retirement Saving Options

Now that you know why retirement planning is so important, take a look at the different types of retirement savings options. From permanent life insurance to a 401(k), there’s something that will work for you. You know what it takes to make your business grow, and you always want the best for it. Put that same dedication into your retirement, so you can live a happy, stable future. Take a look at these common savings options to help you build a tax-diverse plan.

Defined Benefit Plans

This is an employer-pension plan that guarantees employees a certain benefit when they retire. Factors such as age, years of employment, and salary determine the amount received.

  • Benefits
    • It’s possible to make substantial annual contributions
    • Businesses have to fund annually
    • Tax-deductible

Defined benefit plans are good for all company sizes and for partnerships and proprietorships.

Defined Contribution Plans

These are retirement savings programs where employers promise contributions to an employee’s account along with employee salary deferrals during employment. The benefit is based on the contributions and returns that the plan earns.

  • Benefits
    • Tax-deferred contributions for the employee
    • Contributions are tax-deductible
    • Maximum contribution considerations
    • Annual contribution limits
    • Salary deferrals made by employees reduce taxable income

Depending on the plan, this can be a good option for any size company.

Employer-Sponsored IRA Plans

These plans are funded by the employee, allowing the individual to put pre-tax income toward an investment that can then grow as tax-deferred.

  • Benefits
    • Cost-effective
    • Easy to set up and very low maintenance
    • Tax-deferred contributions for the employee
    • Contributions qualify as a deduction against company income

Employer-sponsored IRA plans are great for small businesses and companies with a small number of employees.

Non-Qualified Plans

Non-qualified plans are employer-sponsored plans that are specially designed to meet specific needs and give supplemental benefits to select employees and executives. They are exempt from discriminatory testing that qualified plans are subject to, and they can include permanent life insurance which provide tax advantages.

  • Benefits
    • Protect the business in the case of disability or death of an executive
    • Tax-deductible premiums
    • Employees choose who receives benefits
    • Improve employer’s personal retirement package
    • Tax-deduction when benefits are paid to key employees
    • Benefits paid to key employees, and all costs of plan returned to company when funded with life insurance

These plans are best for larger companies employing key personnel they wish to compensate on a higher level than other employees.

Personal IRA Plans

These are plans funded by the employee, so individuals can put their own income toward investments they choose.

  • Benefits
    • Annual contribution limits
    • Spouses who aren’t working can also contribute
    • If employees are over the age of 50, they can contribute additional amounts each year
    • Tax-deductible
    • Roth IRAs provide tax-free withdrawals at retirement
    • Traditional IRAs can be converted to Roth IRAs

Permanent Life Insurance

Permanent life insurance is business owned or personal life insurance for the business owner and/or key employees. This type of insurance can fund executive benefit plans, as well as personal insurance needs and business buyout arrangements.

  • Benefits
    • Tax-free retirement income
    • Tax-free death benefit
    • Tax-advantaged cash value growth
    • Not subject probate
    • Benefits for chronic or terminal illness

If you’re a business owner interested in providing your employees with a personal pension plan, this is a good option to look into.

The most important thing to remember is it’s never too late or too early to get started on your retirement plan! Get in touch with one of our financial planners today for a consultation.

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