Friends,
A few weeks ago, we highlighted two retirement plans for business owners to consider when establishing benefits for themselves and their employees: the 401(k) plan or SIMPLE IRA. Realizing that max efficiency and tax savings are important to all business owners – the supplemental options to a 401(k)-plan mentioned in the linked article below give owners additional ways to increase contributions and tax savings.
Profit-Sharing Plan
- Typically used in conjunction with a 401(k) plan
- Allows employers to make contributions based on the profitability of the company
- Discretionary match – isn’t required every year
- Contributions are deductible to the employer
- Allows owner to save up to $58,000/year (or $64,500 with the catch-up contribution of $6,500) in 2021
Cash Balance Plan
- Defined benefit plan allowing additional tax-deferred savings
- Max deferral can reach over $300K for those in their late 60s
- Required contribution for owner and employees
- Larger tax-deductible contributions
- Changes in the actual value of the plan's investments are the responsibility of the employer and do not directly impact the amounts participants receive
Let us know if you would like to discuss retirement plan options for you or your business.
Matt and Andrew