Just recently, I thought that it might be the dog days of summer as far as setting up a retirement plan is concerned.
So let me take a stab at answering. One way to answer it is to start with the types of retirement plans that are available:
- Payroll Deduction IRA
- Simplified Employee Pension (SEP)
- SIMPLE IRA Plan
- 401(k) Plan
- SIMPLE 401(k) Plan
- 403(b) Plan
- Profit-Sharing Plan
- Money Purchase Plan
- Defined Benefit Plan
The Internal Revenue Service provides excellent thumbnail sketches on their website, Choosing A Retirement Plan: Retirement Plan Options. But that’s really taking the horse before the cart. The starting point, we believe, should be the business owner answering two questions:
- What is my objective? Is it to maximize my own contributions, or is it to attract, motivate, and retain the high performing employees I need to grow my business? Or, is it a combination of both?
- Where am I in the life cycle of my business? Is my business in a start-up, fast growth, stable growth, or transition/exit stage?
Then, he or she will be able to decide upon the “best plan” or combination of plans that fits their circumstances at this time. A decision that should be periodically reviewed on a regular basis once a retirement plan is put in place.