A retirement plan has the potential to provide significant benefits and tax savings to both small business owners and their employees:

Benefit 1: High Contribution Limits

Among the most important benefits of an employer-sponsored retirement plans are the annual permitted maximum contribution limits, which can be as high as $55,000 in a SEP IRA, Single KSM or Profit Sharing Plan.  See Retirement Plans At-A Glance for details. 

Benefit 2: Taxes

The tax deferral benefits employer-sponsored retirement plans offer may also play a key role in helping employees reach their retirement savings goals.  SIMPLE IRAs and 401(k) plans such as Single Ks allow employees to pursue their retirement savings goals by contributing a portion of their wages into the plan.  This allows employees to reduce their current federal income tax bill by deferring tax payments on their contributions until after they retire, when some employees may experience the added benefit of falling into a lower rate tax bracket.  In addition, potential earnings derived from investments are tax deferred and automatically reinvested.  This includes any employer contributions.

Retirement programs such as Single K and Payroll Deduction IRA also allow Roth contributions.  This enables employees to pay the taxes up-front and benefit from potential tax-free withdrawal on any future earnings, provided certain requirements are met.  The ability to have both taxable and tax-free assets, allows employees to incorporate tax diversification into their retirement portfolio.

Benefit 3: Compounding

Retirement savers with a long time horizon may also realize the added benefit of compounding.  Retirement contributions and earnings continuously reinvested over an extended period of time and, coupled with the tax savings, hold the potential to generate their own earnings.

Benefit 4: Payroll Deduction

Automatic payroll deductions make it simple for your small business clients and their employees to invest in and save for their retirement goals.

Our suite of retirement plans offer the potential for big benefits, to meet the needs of every small business owner. Consult your financial or tax advisor to determine the plan that’s suitable for your business.