Plan Ahead for Your Retirement
IRA, SEP, SIMPLE and 401(K) Plans
Whether retirement days are near or far, you should be up-to-date on the types of retirement plans available to you and your employees. The plans you will hear most about are IRA, SEP, SIMPLE and 401(K). In addition to providing for your retirement, they may offer significant tax benefits today.
IRAs are plans that let you set aside money for your retirement. Banks, financial institutions, mutual funds and stockbrokers are among those who offer IRA accounts.
Traditional IRA: To contribute to a traditional IRA, you must be under age 70 ½ at the end of the tax year and have taxable compensation greater than or equal to your contribution during the year. Contributions may be tax deductible in full or in part, depending on your circumstances. The amounts earned by your IRA contributions are usually not taxed until you withdraw the money. Generally you can’t withdraw money from your IRA before you turn age 59 ½ without paying income taxes and a 10 percent additional tax.
ROTH IRA: Regardless of your age, you may be able to set up a Roth IRA. You can’t deduct your contributions, but if certain requirements are met, earnings will be tax free.
SEP Plan: The Simplified Employee Pension was specifically designated for small employers and has very few administrative burdens or costs. Employer contributions are made directly to IRAs that the employer sets up for the employees.
SIMPLE Plan: Generally employers can set up a Savings Incentive Match Plan for Employees if they have 100 or fewer employees and meet several other requirements. A SIMPLE plan is an arrangement under which an employer makes contributions to employees SIMPLE retirement accounts. Additionally employees can make salary reduction contributions. The two types of SIMPLE plans are the SIMPLE IRA and SIMPLE 401(k) plans.
401(k) Plan: 401(k) plans are the most popular type of retirement plan used today. They can be a powerful tool in promoting financial security in retirement for employees and are a valuable option for businesses considering a retirement plan. Employees may defer a portion of their salary as either a pre-tax or an after-tax contribution. As with IRAs there are different kinds of 401(k) plans. Depending on the type, the employer can make either non-elective or matching employer contributions.
If you have any questions about your retirement plan(s), please give us a call at 336-761-0366 or Click Here to visit the Kensington Financial Group website.