As a small business owner, your mind is always occupied with some aspect of business. Most of your planning is focused on making sure your business is a success well into the future. But, have you given thoughts to your own individual plans for the future? Have you thought about retirement? You may think your options are limited as a small business owner but you may be surprised. Here are a few options to consider:
If you have no employees, or your spouse is your only employee, consider:
SEP IRA – you can contribute up to 25% of your compensation into the plan, up to a maximum of $44,000 in 2006.
Owner-only 401(k) – you can put in up to 25% of your compensation plus and additional $15,000 (in 2006). If you’re 50 or older, you can add an additional $5,000 in “catch-up” contributions.
If you have employees, consider:
SIMPLE IRA – Easy to set up and inexpensive to administer. In 2006, you and each of your employees can contribute up to $10,000 (or $12,500 if age 50 or over). Your business is generally required to match both your and your employees’ contributions, dollar for dollar, up to 3% of their salary, unless you decide to put in 2% of each eligible employee’s compensation.
Safe Harbor 401(k) – offers the features of a traditional 401(k), but the amount you can defer from your salary is not limited to whether your employees contribute. You, as the business owner, benefit because you can contribute up to the annual maximum ($15,000 in 2006 or $20,000 if you’re 50 or older), regardless of how much your employees contribute. Your business is generally required to match both you and your employees’ contributions, dollar for dollar, up to 4% of their salary, unless you decide to put in 3% of each eligible employee’s compensation.