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The Different Types of Employee Retirement Plans


The Different Types of Employee Retirement Plans

In business and careers, many individuals think about their retirement plan and how to set themselves in the best financial shape. Retirement plans are not just important for employees, but for business owners as well. A number of business owners recognize the importance of finding a flexible retirement plan for their employees so they can solidify their financial future. What types of retirement plans are available for you to consider for your employees? Here are several types to consider at your business.


The 401(k) Plan


The 401(k)-retirement plan is the most common and widely known for most companies. This is a flexible plan when it comes to its features and design. The employees can contribute a portion of their earnings to the plan, with some matching contributions made by the employers as well. A traditional 401(k) plan involves contributions from the employees' gross income, while a Roth 401(k) instead gets contributions from their net income after taxes. Employees can also choose what types of investments to make within their accounts, which can range from company stock to mutual funds. Overall, this is a common plan that many companies use and if you choose to go with this one, there are many resources that help you integrate it within your business.


The 403(b) Plan


The 403(b) plan is similar to the 401(k) plan in some aspects. All of your employees are eligible to participate. Just like the 401(k) plan, this plan offers many benefits and perks to employees. The key difference is that it is more commonly used in tax-exempt organizations as well as public institutions. If your business meets the criteria for a tax-exempt organization, then this plan may be worth considering.


The Savings Incentive Match Plan for Employees (SIMPLE) IRA


The SIMPLE IRA plan is suitable for businesses that have 100 or less employees. It is easier to create, has no filing requirements, and involves less maintenance. In addition, it is less costly and both employers and employees contribute to the plan. Employees also have full ownership of the money invested in a SIMPLE IRA account. A point to acknowledge is that the contribution limits are not as high as other plans. If you are considering this type of plan, then be sure to outline the details about these limits with your employees as well.


The Simplified Employee Pension (SEP)


The SEP plan is easy and does not cost a lot to create. In addition, it is a simple way for business owners to make a contribution towards their employees' IRA accounts. An important detail is that employees are unable to contribute to their savings, since this is generally managed by the employers. If this is a plan you want to consider for your business, then discuss this important aspect with your employees.


Choosing the right retirement plan for your employees involves a lot of research. There are many factors to consider, including your annual revenue, size of your company, number of employees, and more. The aforementioned retirement plans can give you a good starting point on addressing your employees' retirement goals. In addition, you can also work with a financial advisor who can provide comprehensive information on which type of system can be the best fit with your business and employees. As you work with your employees on their financial future, discuss these plans with them as well.

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