Masonry Magazine July 2003 Page. 42
Finance Management
Finance
Retirement Plans, Part II
▼Carl Sanger
Serenity Wealth Management, LLC
New York, N.Y.
Do you feel locked out of the retirement plans offered by larger companies? Now, you can own or work for a small business and still retire in style!
Author and editor Robert Orben was once quoted as saying, "Every morning I get up and look through the Forbes list of the richest people in America. If I'm not there, I go to work." So it is our lot that we not only have to work to pay our expenses today but also have a vehicle at our disposal that allows us to plan to pay for our expenses of tomorrow.
In the first part of my series (May 2003), I let you in on the new, tax-favored ways you can save for your retirement goals, even if you own or work for a small business. I described vehicles such as Solo 401(k) Plans, SEPs and SIMPLE IRAs, to name just a few-that are now available to give every worker an equal opportunity to build their retirement nest egg.
In part two of my series, I'll give you some more ways to fund your own prosperous retirement.
What Else is Available for Retirement Savings?
As I stated in my previous article, there are always the more commonly known types of retirement accounts such as traditional IRAs and Roth IRAS. But if you want to sock away some serious money, the $3,000 maximum annual contributions that go with these types of accounts just won't cut it. So, besides the plans I've already covered, you can consider starting either a profit-sharing plan, money purchase plan, or defined benefit plan as alternatives.
Profit Sharing Plans
Profit sharing plans can be a fine option for many small businesses primarily because a company needs to have only one employee to offer this kind of plan. Administrative maintenance is small and employers are permitted to make large contributions for employees. This plan also carries with it the advantage of flexibility when it comes to making annual contributions to employee accounts. The annual amount of the employer contribution is completely up to the employer from year to year. In fact, contributions can range from nothing at all to up to $40,000 per year and carry with them certain tax deductions for the employer, as well. Should the employer decide to permit it, employees are also allowed to contribute to their own account each year. Employers, when creating their company plan, also have the choice of determining when employer contributions become vested - this option can be a good way of minimizing employee turnover. Employees are often happy with profit sharing plans because no matter when the employer-contributed amount vests, employees have the peace of mind of knowing that their own contributions become vested 100 percent immediately.
Money Purchase Plans
Money purchase plans offer many of the same benefits as profit sharing plans except that contributions made by employers must be a fixed amount based on a percentage of the employee's compensation. This is sometimes a blessing for those doing long-term financial planning for the company as far as expenses go, as well as for those