Retirement Plan Benefits

Employee Benefits

Retirement Plan Benefits

A big mistake some business owners make is thinking they can’t afford to fund a retirement plan in lieu of putting profits back into the business. But less than half of the employees at small companies participate in retirement plans. And companies that do offer this benefit report increased employee retention and happier, more efficient workers. Also, don’t forget about yourself: Many business owners are at risk of having insufficient funds saved for retirement.

To encourage more businesses to launch retirement plans, the Economic Growth and Tax Relief Reconciliation Act of 2001 provides a tax credit for costs associated with starting a retirement plan, including a 401(k) plan, SIMPLE plan or Simplified Employee Pension (SEP). The credit equals 50 percent of the first $1,000 of qualified startup costs, including expenses to set up and administer the plan and educate employees about it. For more information, see IRS Form 8881, Credit for Small Employers Pension Plan Start-up Costs (PDF).

Don’t ignore the value of investing early. If, starting at age 35, you invested $3,000 each year with a 14-percent annual return; you would have an annual retirement income of nearly $60,000 at age 65. But $5,000 invested at the same rate of return beginning at age 45 only results in $30,700 in annual retirement income. The benefit of retirement plans is that savings from tax-free until you withdraw the funds–typically age 59. If you withdraw funds before that age, the withdrawn amount is fully taxable and also subject to a 10-percent penalty. The value of tax-free investing over time means it’s best to start right away, even if you start with small increments.

Besides the long-term benefit of providing for your future, setting up a retirement plan also has the immediate gratification of cutting taxes

Take a closer look at different retirement plans for yourself and your employees:


Defined Benefit Plans


Explore what Employee Benefits options make sense for your business,
contact Vermillion Financial Advisors today.

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