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Choosing The Right Retirement Plan

If you own a business, you’ll need to explore the variety of employer-provided retirement plans before choosing one. Some allow participants to make contributions that are deductible from taxable income, timely during this tax season. Here’s a summary of some of them:

SIMPLIFIED EMPLOYEE PENSION (SEP)

Ideal for solo entrepreneurs and very small companies, a SEP-IRA features large contribution limits and flexible rules. Employers can contribute to a SEP and credit deductions against their 2018 taxable income up to the filing deadline, plus extensions.

401(K) AND MORE

Employers with 401(k), 403(b) and most 457 plans will see contribution limits increase. Growing companies looking for a tax-advantaged way to provide a retirement plan for their employees might consider these plans, but only for 2019 and beyond. You can’t make past-year contributions to these plans.

REALLY SIMPLE

SIMPLE IRAs are potentially less complicated to understand and less costly to set up. Employers make either matching (up to 3% of compensation) or nonelective contributions (2%), with employee salary deferral limits lower than most plans. Any employee who earned at least $5,000 during any two calendar years and is reasonably expected to earn $5,000 in the current calendar year must be eligible. Companies can fund the plan up to their tax filing deadlines, but employees can’t make past-year contributions.

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