Employee Benefits

Advantages of Retirement Plans

Tax Advantages:

  • Your employer contributions to qualified retirement plans are tax deductible.
  • Employee contributions (other than Roth IRA contributions) are not taxed until they are distributed to the employee.
  • Funds invested in the retirement plan grows tax deferred, or, in the case of a Roth account, tax-free.
  • You may be able to claim a tax credit equal to 50 percent of the cost for setting up and administering the plan--up to $500 per year for the first three years of the plan.
  • Certain low- and moderate-income employees may be eligible for a tax credit for part of their retirement plan contributions.

Other Advantages of Retirement Plans:

There are many types of retirement plans you can set up to fit your business. Besides the opportunity to save for your employees' and your own retirement and get a tax break, retirement plans can be tailored to offer a few advantages to both you and your employees:

  • Higher contribution limits to allow you to set aside a larger amount for retirement
  • Catch-up allowances for employees over 50 that let them set aside more money because they are closer to retirement
  • Special tax credits for smaller businesses
  • Added programs for your 401(k) that allow employees to voluntarily set aside more money after-taxes in a Roth IRA
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