What Retirement Plans Suit Your Employees?
Most young employees today fail to think about getting a retirement plans. As a responsible employer, you should impose upon them the idea that they should prepare for their retirement sooner rather than later. This article hopes to give you a better perspective about some of the most important retirement plans and what each entails.
Traditional IRA or ROTH IRA (Individual Retirement Arrangement)
Both IRAs help you save for retirement on a tax deferred manner. The difference is that with the traditional IRA, you avoid state and federal taxes when you are making contributions until withdrawals are made in retirement. Then, it becomes taxable unless qualified for an exception. On the other hand, ROTH IRA provides no tax break during contribution phase but qualified distributions are tax free when it is time for you to take it out.
401K Retirement Plan
Before your paycheck is taxed, a portion is automatically deducted for 401K contribution and this happens at each pay period. The contributions are then invested. While it grows in the 401K account, it is not subject to federal income taxes until distribution in retirement takes place.
403B Tax-Sheltered Annuity (TSA) Plan
This type of retirement plan is intended for employees of certain tax-exempt organizations such as teachers and workers in public schools and universities, certain health care organizations, government and church workers. These organizations are exempted from certain administrative processes that apply to a 401K plan which allows lower costs for 403B. It also includes an annuity contract bought through an insurance company which invests in mutual funds.
Simple (Savings Incentive Match Plan for Employees) IRA or SEP (Simplified Employee Pension) Plan
Both options are intended for small employers or business owners so they may be able to contribute to their employees’ and own retirement savings in a simplified way. Although neither one requires IRS reporting, the basic difference between the two plans is that Simple IRA is not funded solely by the employer while SEP is. Also, Simple IRA’s contribution limits are much lower than that of a SEP Plan.
Salary Reduction Simplified Employee Pension (SARSEP) Plan
This savings plan is employer-sponsored similar to the SEP Plan. However, SARSEP adopted a tax deferred IRA-based salary reduction scheme applied to a small sized business set up. An important factor to consider in SARSEP is that no more than 25 employees must be employed and at least 50% of them must make elective deferrals. Deferral amount is then reported as retirement contributions.
Let ARCHER JORDAN Help Create the Ideal Retirement Plans for Your Employees
It pays to start young in knowing the different types of retirement plans available so you can select wisely which plan will affect your long-term savings. ARCHER JORDAN created the ARROW Administrative Services to help guide you through in having a retirement plan included in your employees’ benefits package. At ARCHER JORDAN, we offer security in knowing that the future savings of your hourly workers are taken care of. Contact us today.
