Lots of Benefits - when you set up an
employee retirement plan
The route to retirement
security is the right retirement plan. We’ll help you along the way!
Did You Know...
- that retirement can last for 30 years or more?
- you might need up to 80% of your current annual income to retire
comfortably?
- the average monthly benefit paid by the Social Security
Administration is $1,200?
Why should you set up
a retirement plan, and what are some of the benefits?
A retirement plan has
lots of benefits for you, your business and your employees. Retirement plans
allow you to invest now for financial security when you and your employees
retire. As a bonus, you and your employees get significant tax advantages and
other incentives.
Business Benefits
- Employer contributions are tax-deductible.
- Assets in the plan grow tax-free.
- Flexible plan options are available.
- Tax credits and other incentives for starting a plan may reduce
costs.
- A retirement plan can attract and retain better employees, reducing
new employee training costs.
Employee Benefits
- Employee contributions can reduce current taxable income.
- Contributions and investment gains are not taxed until
distributed.
- Contributions are easy to make through payroll deductions.
- Compounding interest over time allows small regular contributions
to grow to significant retirement savings.
- Retirement assets can be carried from one employer to another.
- Saver’s Credit is available.
- Employee has an opportunity to improve financial security in
retirement.
Future Retirement
Savings Value
Monthly Savings, 6%
| 5 Years
| 15 Years
| 20 Years
|
$50
| $3,506
| $14,614
| $23,218
|
$200
| $14,024
| $58,456
|
$92,870
|
$500
| $35,059
| $146,136
| $232,176
|
What are the first
steps to learning about and setting up a retirement plan?
A good place to start is
by contacting a tax professional familiar with retirement plans or a financial
institution that offers retirement plans. Helpful reading materials and IRS
websites are listed at the end of this page.
What are the stages
of sponsoring a retirement plan?
Sponsoring a retirement plan has four stages: Choosing, Establishing, Operating, and Terminating the plan.
Choosing
You begin by:
- thinking ahead toward retirement in general; and
- learning about the specific ways that money can be put aside for
your and your employees’ retirement, including types of tax-qualified
retirement plans.
Establishing
You take the necessary
steps to put your plan in place. Depending on the type of plan you choose, the administrative
steps may include:
- adopting a written plan;
- arranging a fund for the plan’s assets;
- notifying eligible employees about the terms of the plan; and
- developing a recordkeeping system.
Operating
You want to operate your
retirement plan so that the assets in the plan continue to grow and the
tax-benefits of the plan are preserved. The ongoing steps you need to take to
operate your plan may vary depending on the type of plan you establish. Your
basic steps will include:
- covering eligible employees;
- making contributions;
- keeping the plan up-to-date with retirement plan laws;
- managing the plan assets;
- providing information to employees participating in the plan; and
- distributing benefits.
Terminating
When your plan no longer
suits your business, you will close out the plan and notify the
appropriate parties.
You may want to discuss
these four stages with a tax professional familiar with retirement plans or a
financial institution that offers retirement plans.