Small Business Retirement Plan Options

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As you begin your tax planning for year-end, don't forget to consider retirement plans. You may think your cash is too tight, but remember retirement plans can be partially financed with the tax savings they provide. Employers have numerous options to chose among, but you can not give yourself a nice retirement plan at your employee's expense. Contributions to your retirement plan sponsored by your company must include equal contributions for your employees as well.

Employers can select a plan to which only the business contributes, a SEP-IRA, which is simple to set up and has no-frills. If you want a plan that allows employees to contribute, but want to keep it simple, the SIMPLE IRA has become very popular among small businesses. It allows employees to make tax-deferred contributions, similar to the benefit provided by large companies with 401(k) plans.

The most complicated small business retirement plan is the Keogh, which can be established as a profit-sharing plan or a defined-benefit plan. It is the closest to a 401(k) and also the most complicated to establish. No matter which plan you choose, you may also be eligible to establish a Roth IRA to shelter even more of your money provided you fall within the income limits found in the chart below.

Retirement Plan Options for Small Business Owners
Plan	Contribution Limits	Income Limits	Comments
SEP	13.04%*/$25,500	None	Easy to establish and administer
Keogh	20%/$30,000	None	Usually requires the help of a professional to set up. It can designed as a profit-sharing plan, profit-sharing plus a money-purchase pension plan, or defined benefit plan.
Roth IRAs	$2,000 for singles, $4,000 for couples	$95,000-110,000 for singles, $150,000-160,000 for joint filers	Contributions are not tax deductible, but earnings grow tax-free and can be withdrawn tax free at retirement after age 59 1/2..
SIMPLE IRAs	$6,000	None	Provides you and your employees with a simplified way to establish a retirement plan. Employees can choose to make salary reduction contributions to the plan rather than receiving these amounts as part of their regular pay. Employers must contribute or match employees as well.

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