Retirement Highlights
By Joel Zimmerman

7 Essentials for Selecting the Right Retirement Plan: Business Owners or Corporates

Retirement plans are not just the prerogative of individuals, but important for business owners as well as corporates to consider. Businesses may view retirement plans purely as a benefit that they can provide to their employees, but that is not the only factor in play.

Providing retirement plans for employees offers a wide range of tangible and intangible benefits to businesses and corporate entities.

These include being able to attract and retain quality employees, and at the same time reduce the tax burden your company faces. Additionally, it can also help you invest money towards your own retirement and ensure the security of both your families, the one at work and the one at home!

Here are 7 essential tips that can help you invest in the right retirement plans:

  1. Look Around Before You Shop

    Retirement planning is a long-term decision, both for you and your employees. While 401(k)s may seem like the standard, there are several other plans available. These include profit-sharing plans, integrated plans, and cross-tested plans, to name a few. It’s best to employ a professional to help you pick the best one suited for your needs

  2. 401(k) Plans are Not Always the Best Choice

    401(k) may be the plan most companies pick, but are not the best ones for everyone. The maximum amount is capped and the plan limits your contributions in case of insufficient matching contributions from your employees. You must hold off choosing this plan till you have fully explored other options.

  3. Some Plans Enable Pre-Tax Withdrawals from Business

    Most business owners have their net worth locked in their company at any point in time. A key concern they face is the need to retain access to their wealth for liquidity. Withdrawing cash from a business as compensation or dividends usually incurs high income tax. Retirement plans enable divestment of funds from business without any tax implications till retirement.

  4. Varied Plans Offer Better Flexibility

    One size fits all” can be a problem in case of retirement plans. While all plans must comply with federal anti-discrimination regulations, many retirement plans allow variable limits such as higher contributions or benefits for older and higher paid employees. This works out very well since the owner would be the oldest employee in the system.

  5. Retirement Planning for Your Exit Plan

    Picking the right retirement plan enables you to withdraw money from your business on a pre-tax basis if you need access to funds in an emergency. This also helps reduce your dependency on the business for income, reduces your financial risk and broadens your available exit options.

  6. Strong Creditor Protection for Owner Assets

    Retirement plans and certain insurance policies offer immense asset protection and are considered a safe method of investment for a business owner’s assets. Creditors cannot take assets from retirement plans, making them a safe haven for your assets, while the right kind of insurance can ensure even greater asset protection.

  7. Financial Protection for Life

    Life insurance is a crucial component to allow business continuity in the event of an owner/partner’s death. Consult an expert and look into life insurance plans with buy-sell agreements, to safeguard your business. Whether to buy term or whole life insurance, how much to buy and other factors are choices you must make after careful consideration.

So, whether an individual or a business, you need to plan for that rainy day when work is no longer a priority in your life. Get in touch with LifeCentra’s team of expert financial advisors to discuss your retirement planning requirements today!

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