Michelle discusses small business retirement plans

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In honor of The Lift’s small business week, Certified Financial Planer Michelle Buria stopped by to talk about small business retirement plans. “Typically with a small business owners, they’re focused on the here and now,” Michelle explains. “They’re not really thinking about the future. So it’s important to talk about retirement planning because a some point maybe they want to move on from their business.”

Plan No.1: SEP IRA

“It’s really intended for business owners that have zero to few employees. The reason for this is because the business itself actually contributes to the retirement plan on behalf of the employees. Another factor with that is whatever the business owner sets aside for themselves as the percentage of their income, the business also has the give the same percentage for all the employees.” You can contribute up $61,000 dollars a year, which is a significant jump compared to the regular IRA, which is $6,000 dollars.

Plan No. 2: SIMPLE IRA

“This is where the employees have to contribute out of their own wage into the plan. The company does have to provide a match up to certain percent.” The advantage that is that you can set up $14,000 compared to a regular IRA. Then there’s a catchup contribution of $3,000.

Plan No. 3: Traditional 401k

“In this case we’re talking about a Solo 401k, it’s strictly for a business owners. You also have the option of a traditional versus a Roth investment started. In a regular 401k you can set aside $20,500, while in a solo K you can max it out at $61,000. Then there’s the option of $6,500 catchup contributions for those over 50.”

There’s deadlines and tax advantages to be aware of for each so Michelle recommends meeting with a financial planner and tax adviser.