Americans aren’t very good savers – that’s no secret. Many workers wonder how they’re going to make it after they retire. Businesses of all sizes frequently offer a retirement plan for their employees – most of whom are tax-qualified and protected under ERISA, the law that governs retirement plans.
Retirement plans have tax advantages for both employers and employees. As an employer or solopreneur, you receive tax breaks for offering a retirement plan and also for any contributions you may make to one. You’re able to make contributions for yourself, thus lowering your taxes. Employees receive tax breaks for the pre-tax contributions they make to the plan. Retirement plans are an effective way for both employers and employees to save for greater financial security when they retire.
Having a retirement plan not only helps your taxes, but also:
- Attracts new employees
- Engenders greater employee satisfaction
- May meet the requirements of state-mandated plans, including Maryland $aves who:
- Are after-tax Roth IRAs
- Have fewer investment options
- Have lower contribution limits
Below is a discussion about the benefits for different types of retirement plans based on your company size and business objectives. Companies are defined by number of employees as follows:
- Small businesses (self-employed and solo entrepreneurs): under 10 employees
- Mid-sized companies: 10-100 employees
- Large companies: 100+ employees
A survey of nearly 2,000 small business owners in 2017 by the online business resource Manta found that 34% of small business owners didn’t have a retirement plan. Are you one of these employers in 2023?