Since the beginning RK Asset Management has been involved in helping small and medium size businesses establish qualified retirement plans. We feel that the entrepreneur, executive and employee at some time in the future should have an exit strategy from employment. As social security becomes less of a factor for ones retirement income, a qualified plan will be the key component to fulfill ones futures needs. Many options are available so our job is to first help you determine the most suitable plan for you business. The process will continue for many years as we develop a professional money management solutions to achieve a desired rate of return. The following types of plans are the most commonly used for today’s qualified pension plans.
The Sep IRA is the cheapest and easiest plan to set up for any small employer. SEP plans are more popular among self employed individuals because they can put a large percentage of income away. Right now the max contribution into a SEP plan is 25% of income up to $49,000 for 2012. 100% of the money contributed is vested immediately for all eligible employees. Business owners need to take in account the cost of eligible employees when thinking about establishing a SEP for their business.
The SIMPLE IRA is more popular among small employers who have fewer than 15 employees and want to offer their employees a cost effective retirement plan. The SIMPLE is funded by both the employer and employee. In 2012 an employee can put dollar for dollar up to $11,500 of earned income away. The employer can match the employee’s contribution dollar for dollar up to 3% of earned income. A catch up provision exist for employee over 50. SIMPLE’s are great low cost alternatives to 401k plan.
The owner only or individual 401(k) is a newer type of plan designed for the self employed. It is basically a 401(k) plan with out the administrative cost. Similar to a SIMPLE IRA there can be both employee and employer contributions. In 2012 the max employee contribution is $17,000 and employer contribution is 25% of income/salary. The combined total is not to exceed $49,000 a year. The ideal candidate is one who is self employed with income less then $160,000 and looking to maximize their deduction. An added advantage is the ability to take loans prior to retirement. A catch up provision exist for employee’s over 50, which allows for an additional $5500 contribution.
Traditional 401(k) profit sharing
The traditional 401k Plan is the most popular plan used by employers in America today. A 401k Plan allows employees to make payroll deferrals dollar for dollar up to $17,000 a year of their earned income. The employer or profit sharing contribution is normally done on some type of match with the employee. For example, for every dollar an employee puts into the plan the employer may put in a dollar as well. Vesting schedule are use to keep employees from departing the company early and taking the matching funds. An employer has added fiduciary responsibility when establishing a retirement plan for their employees. There are ways for employers to minimize this risk and RK Asset Management takes pride in having the in depth knowledge on how to guide through that fiduciary process.