Pension Plans For Small Business

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Once that's done, actual contributions can be deferred until the extended due date for that year's return.

Annual contributions to Keogh profit-sharing plans are based on a percentage of self-employment income or compensation and subject to a $42,000 ceiling.

A plan document must be drafted in Year One (this may cost a couple hundred bucks), and the IRS demands an annual report (you can probably do this yourself).

Keogh defined benefit pension plans are designed to deliver a targeted annual retirement benefit, which can be as high as $170,000.

Each year's contribution must be calculated by an actuary--the exact amount depends on your income, the target benefit, years until retirement and anticipated investment returns.

Annual actuarial fees and the required IRS report can run up to a couple grand.However, the percentage can be varied each year, so lower amounts (or nothing at all) can be contributed when you turn out to be starved for cash. SEPs are great for procrastinators because they can be opened up as late as the extended due date of your income tax return.Finally, SEPs are much simpler to establish and administer than Keogh profit-sharing and pension plans.The same relatively generous thresholds apply even if you have a SEP, 401(k)or Keogh plan (and even if your spouse is covered by a retirement plan through work of self-employment).So you can contribute the max to your SEP, 401(k) or Keogh and then pop an additional ,000 (or ,000) into a Roth IRA to boot.There are a number of retirement plan options for small business owners.Some of these plans are best suited for owners themselves, while others are a good way for business owners to extend retirement benefits to current or future employees.The existence of employees means you should consult a good employee benefits pro before initiating any type of retirement program (other than contributing to a traditional or Roth IRA for yourself).don’t have a retirement plan, which means too many people avoid taking steps to secure their future.(This figure rises in 2006 and beyond.) On top of that, you can contribute and deduct an additional amount of up to 25 percent of your compensation income, or 20 percent of your self-employment income.Roth IRAs--Retirement Plan Dessert OK, you've now decided to set up a SEP, Solo 401(k) or Keogh plan. Contributions are nondeductible, but earnings build up tax-free and you can eventually take out all your money--including earnings--without owing Uncle Sam a dime.


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