Intro to Retirement Plans

The perks of owning your own business are bountiful but one question many S Corp owners have is how to contribute to their retirement. Here are the plans that our members have found most beneficial to them as an S Corp owner.

  1. Solo 401(k) is a retirement saving and investment plan employers can offer that provides employees a tax deferral on money contributed. With a Solo 401(k), a self-employed business owner can make contributions as both the employee and the employer. You can even deduct your employer contributions as a benefits expense.

  2. A Simplified Employee Pension Plan (SEP IRA) is a traditional IRA for self-employed individuals and small-business owners. A SEP IRA is typically very low cost, and easy to implement. The SEP IRA can be a great alternative for making tax-deductible contributions because it allows business owners to contribute more than some other retirement options.

For more on retirement options, here’s a comprehensive list of Self-Employed Retirement Plans

Why use a Retirement Plan for your Business

S Corp owners benefit greatly from contributing and these benefits can extend to your personal and business taxes. For example, with a Solo 401(k), your employee contributions can be made on a pre-tax basis, which defers your taxable liability, and your employer contributions are a deductible expense of the business, also reducing your taxable liability. All while helping you plan for your future!

Not all Retirement Plans are Built the Same

Your S Corp will not benefit from a Roth or Traditional IRA. Contributions to Roth and Traditional IRAs should be paid from a personal account that isn’t connected to your S Corp. Contributions will still be reported on your personal tax return, so please tell us about them before the end of the year.

How Retirement Plans relate to Collectives’ process:

Our team will support you every step of the way during your Business Insights Call (Business Insights Agenda)! We’ll provide you with resources to identify which retirement account works best for you, assist with pinpointing the contribution amount and set up this benefit in your payroll account.

Remember: Once you've chosen your retirement account and start to contribute, the employer contributions should be coming out of your business account.

Disclaimer: This information is provided for general education purposes only and is not intended to be construed as tax, financial or investment advice. We recommend consulting your financial advisor to help determine the appropriate plan for you

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