Q. What Retirement Plans are available and what are the main characteristics of each?
A. Some of the most common Retirement Plans include:
• A 401(k) Plan, which is basically a savings account geared for retirement. Employee contributions are made via payroll
deduction. Regular 401(k) contributions are on a pre-tax basis, and therefore reduce your federal and state withholding
taxes.
• An ESOP, which stands for Employee Stock Ownership Plan, is a retirement Plan which is designed to invest primarily
in the employer’s company stock
• A Profit Sharing Plan, which is a Plan that allows the company the option of making a contribution each year, normally
dependent on the profits for the year.
• A Cash Balance or a traditional Defined Benefit Plan is a Retirement Plan in which the company makes contributions
for the employees. The amount of the contributions is actuarially calculated based on a number of factors, including age,
compensation, etc. Employee contributions are currently not permitted.
Q. How does a 401k Plan differ from a regular savings account?
A. A 401k Plan has several advantages over a savings account, including:
• Deposits made are not subject to any taxes until later withdrawn
• Income on the account is not subject to any taxes until later withdrawn
Q. What is a Roth 401(k)?
A. A Roth 401(k) permits employees to contribute 401(k) money, via payroll deduction, on a "roth" or after-tax basis. There are no salary limitations imposed. Contributions and earnings will accumulate and be totally tax free when withdrawn, provided requirements are met.
Q. When can I withdraw my money?
A. You are eligible to withdraw your money when you retire, or possibly when you terminate employment with the company,
depending on the terms of the Plan.
Q. How do I start a retirement plan as a company? As an individual?
A. Our consultants can assist you in choosing the proper type of Retirement Plan, for your company, or as a self-employed
individual, for yourself.
Q. How will it affect my taxes as a company? As an individual?
A. All monies contributed to the retirement plan are a tax deduction to the company, and in the case of 401(k) contributions,
are a tax deduction to the individual - therefore reducing your tax liability for the year.
Q. Can I set up an individual 401k plan?
A. As long as you are a self-employed individual, or a sole-proprietor where the only other employee is your spouse, you can
set up an individual or solo-401k Plan.
Q. What type of retirement savings plan is most beneficial to me?
A. Many factors are taken into account in determining this. We would be glad to meet with you to discuss your specific situation.
Q. How can I encourage my boss to set up a retirement savings plan for the employees?
A. A retirement savings plan is not only a wonderful benefit for the employees, it can also be used as an employee retention tool, and it can aid in recruiting new employees. For the company, it provides a nice tax benefit.
For any further information, please contact our office at (440) 572-4950 or zabarsky@ameritech.net.
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