Types of Small Business Retirement Plans

Estimated reading time: 3 minutes

It seems as though a new era is emerging; small businesses are growing more and more popular and soon they are going to be the staple of modern culture. As more and more people move away from large companies it becomes increasingly more important to educate yourself on the steps you should be taking in order to ensure a comfortable future for yourself and, if you’re a business owner, a comfortable future for your employees. Below are a few retirement options to compare that are best suited to small businesses.

One option for a small business, more specifically in-home businesses that consist solely of the owner and possibly a spouse, would be the Solo 401K Plan. Similar to other retirement plans both the employer and the employee contribute however, because you are self-employed you hold both titles. Salary deferrals up to a certain amount are available as well as up to 25% of compensation of the annual maximum.

Another good option for small business is the Simplified Employee Pension Plan (SEP). While SEP’s can be used by any businesses, it is recommended for small businesses. This plan is different than some of the other traditional ones in the fact that it is fully funded by the employer and they contribute up to 25% of an employee’s eligible compensation a year. Each eligible employee must have an individual SEP account and will receive the same percentage of compensation as all other eligible employees.

Many small business that have 100 employees or less will often have a Savings Incentive Match Plan for Employees (Simple IRA). In order to be eligible for this plan the employer must have earned at least $5000 in the previous year, and any employees must have earned at least $5000 from the employer for the two prior years and have an expected $5000 income in the upcoming year. This plan is funded by employer and employee. Employers have a mandatory matching contribution and employees can potentially have 100% compensation if the amount is less than the set total.

One of the most well-known retirement plans is the 401K Plan. This plan allows for the employee to make personal contributions up to a certain amount per year however, one of the main advantage of this plan is that there are many investment options open such as mutual funds. Employers are also required to make a certain percentage of matching contributions. This plan is more popular with some of the bigger companies and corporations.

If you are considering getting involved with a small business or opening up your own, it is important to stay informed and know all your options. These are some of the more established retirement plans in place currently, but if none of these seem like the right fit for you, don’t be discouraged, there are still other viable options. There may be some other slight variations of the plans covered above that are more catered towards what you want. Prepare for your future and decide what you’re looking for now so that when the time comes for you to retire, you’ll be able to transition with ease.

How to Find the Best Custodian For Your Self-Directed IRA

Estimated reading time: 3 minutes

As the popularity of self-directed IRAs continue to grow, individuals who are interested in this type of retirement account quickly learn that there are many different custodians who offer these accounts.  Unfortunately, because most of these custodians are not quite as widely known as the banks, investment brokerages and other large financial institutions that tend to offer traditional IRA custodial services, it can sometimes be a challenge to find the best custodian for your self-directed IRA. Here are some tips to finding the custodian who can best serve your needs.

Experience and Focus. Concentrate your custodian search toward those who have significant experience in offering self-directed IRA custodial services, and who focus on those services. In addition, a financial institution that concentrates its efforts on providing those custodial services may be better able to fill your needs than a larger firm that offers a broad range of financial services but no focus on self-directed IRAs.

Ease of Account Setup. The process of setting up a self-directed IRA should be no more lengthy or burdensome than setting up an IRA with a traditional custodian. Quest Trust Company, for example, provides easily downloadable new account informational packages and forms on its website.

Fees. It’s important to take any potential custodian’s fee structure into consideration, but not to make low fees be the only factor you use in your decision. Expect to pay a quarterly or annual fee based on the size of your account, plus additional fees depending on the types of investments you make with your self-directed IRA.

Account Type Options. While most retirement savers will choose a traditional IRA format for their self-directed IRA, you may want the flexibility to consider other types. Look for a custodian that offers different types of IRAs. Remember that virtually any legal IRA structure can use a custodian who offers the self-directed features. Quest Trust Company, for example, offers self-directed custodial services for the Roth IRA, SIMPLE IRA, SEP IRA, and even other types of retirement and tax advantaged accounts such as the 401(k), health savings account (HSA) and Coverdell ESA.

Avoid Aggressive or Questionable Legal Interpretations. You might notice that one type of self-directed IRA not listed above is the so-called “checkbook control” or “LLC” self-directed IRA. While there are some self-directed IRA custodians who offer this type of account, the legal basis for checkbook control of IRAs is not well established. Since checkbook control over IRA assets arguably runs contrary to the other rules and regulations governing retirement accounts, trusting the tax-advantaged classification of your retirement funds to this type of account or custodian may present a significant risk.

Information and Education. Retirement account rules and regulations are always changing, so even the most experienced investors can benefit from a custodian who provides educational opportunities to their clients. Look for custodians who have educational materials on their website, and who provide in person or online seminars and educational opportunities as well.

After taking all of these factors into account you should be able to find the best custodian to help you set up and maintain your self-directed IRA.