A Senior's Life

The Right Retirement Plan For You Or Your Employees?

 

Retirement is probably the number #1 reason that people invest and there are a variety of Retirement Plan choices. Whether you are an employer trying to provide the best benefit package options for your employees, or you want to make sure you have a good handle on the plan that is offered to you at work: Here is a brief look at the different plans and what they have to offer.

 

The Traditional 401(k). This plan is known as a defined contribution plan and is the most poplar plan in the market today for retirement savings.  It basically replaced the defined benefit plans (pension plans) that were most prevalent for workers before 1984. The 401(k) plan is primarily funded with pre-tax dollars taken out of your paycheck (through payroll deductions).  An employer can make tax-deductible employer contributions either as matching your level of contribution or (even more generously) make contributions to your account directly on your behalf.

 

The I.R.S. currently will allow you to contribute up to $16,500 a year in a Traditional 401(k); COLA adjustments may drive that limit higher in the future. The I.R.S. also allows catch-up contributions (additional contributions from those aged 50+), with a current annual limit of $5,500. In 2011, the total amount of contributions into a 401(k) by you and your employer can’t exceed the lesser of 100% of your compensation or $49,000 ($54,500 if you are 50 or older).1,2

 

There are several variations on the traditional 401(k) theme:

 

The SIMPLE 401(k). Designed for small business owners who want to avoid the retirement plan administration or non-discrimination tests that are required with a Traditional 401(k), the SIMPLE 401(k) is available for businesses with less than 100 employees. Like a Safe Harbor 401(k) plan, the business owner must make fully vested contributions (a dollar-for-dollar match of up to 3% of an employee’s income, or a non elective contribution of 2% of pay for each eligible employee.). For 2011, the maximum pretax employee contribution to a SIMPLE 401(k) is $11,500, and employees with a SIMPLE 401(k) can’t have another retirement plan with that company.2

 

The Safe Harbor 401(k). As a result of the Small Business Job Protection Act of 1996, the Safe Harbor plan combines the best features of the traditional 401(k) and a SIMPLE IRA, making it very attractive to a business owner. With a Safe Harbor plan, a business owner-operator can avoid the big administrative expenses of a Traditional 401(k) and enjoy higher contribution limits than those available in the Simple 401(k). The Safe Harbor plan allows for employers to make matching or non-elective contributions to each employee. Employers typically match contributions dollar-for-dollar until the employee’s contribution equals 3% of the employee’s compensation. After that, an employer has the option to match employee contributions at 50¢ on the dollar until the employee’s contribution equals 5% of the employee’s compensation.2

 

The Profit Sharing Plan.  Any size business can established this highly flexible plan which can be combined with other retirement plans. In fact, the company does not need profits in order to make contributions to a profit-sharing plan. Of course, having a profit would probably make it easier to actually contribute something. 3
 

Since there are not set amounts for contributions, it is the employer’s discretion each year to determine the dollar amount that is contributed for each employee’s separate account.  If the employer can afford to make contributions to the plan, then they will need to have a set formula for determining how the contributions are divided. 
 

One common method for determining each participant’s allocation in a profit-sharing plan is the “comp-to comp” method. Under this method, the employer calculates the sum of all of its employees’ compensation (the total “comp”). To determine each employee’s allocation of the employer’s contribution, you divide the employee’s compensation (employee “comp”) by the total comp. You then multiply each employee’s fraction by the amount of the employer contribution. Using this method will get you each employee’s share of the employer contribution. This plan is employer only contributions and for 2011, the maximum contribution is the lesser of 25% of compensation or $49,000.3
 

The Solo 401(k). Combine a profit-sharing plan with a Traditional 401(k), and you have the Solo 401(k) plan, a retirement savings vehicle designed for sole proprietors with no employees other than their spouses. These plans currently permit you to contribute up to $49,000 annually plus $5,500 in catch-up contributions for a total of $54,500 if you are 50 or older.4

 

The Roth 401(k). Imagine a Traditional 401(k) fused with a Roth IRA. Here’s the big difference: you contribute after-tax income to a Roth 401(k), and when you reach age 59½, your withdrawals will be tax-free (provided you’ve had your plan for more than five years). The annual contribution limits are the same as those for a Traditional 401(k) plan.5

 

You can roll Roth 401(k) assets into a Roth IRA when you retire – and you don’t have to make mandatory withdrawals from a Roth IRA when you turn 70½. With a standard 401(k), you have to roll over the assets to a traditional IRA and make the required withdrawals.5
 

The DB(k).The DB(k) is new version of a “old” defined benefit retirement plan mixed with some of the features of a 401(k). Many companies with fewer than 500 employees are beginning to take advantage of their benefits. They offer plan participants a retirement savings plan with the potential for a small income stream in the future, mimicking the pensions of years past. The pension income equals either a) 1% of final average pay times the number of years of service, or b) 20% of that worker’s average salary during their five consecutive highest-earning years.6,7

And then there are SEP-IRA, SIMPLE IRA and Keogh plans…
 

The SEP-IRA. This employer-funded plan gives businesses a simplified plan to make employee retirement contributions (and optionally, their own). The employer contributions are 100% vested from the start, and the employer can supplement the SEP-IRA with another retirement plan. In 2011, an employer’s annual contribution limit to a SEP-IRA can’t exceed the lower of $49,000 or 25% of an employee’s salary. A self-employed individual’s personal contribution limit to a SEP-IRA depends on such factors as service, performance, and salary.4,8
 

The SIMPLE IRA. This popular option like a SIMPLE 401(k) – a small business retirement plan with mandatory employer and optional employee contributions and a $11,500 annual contribution limit. In this plan the one big difference for the business owner is, if the business is not doing well, the owner can temporarily reduce plan contributions. The employer contributions are still 100% vested from the beginning, and $2,500 catch-up contributions are currently allowed for employees 50 and older.9

The Keogh Plan.The Keogh is designed for small unincorporated businesses. There are defined benefit, money purchase and profit-sharing variations; the defined benefit variation is a qualified pension plan offering a fixed benefit amount. In 2011, the annual contribution limit for a profit-sharing Keogh is $49,000 (subject to limits outlined in IRC Section 415).10

Decisions, Decisions, Decisions? As an employer, you might not have realized you have such a diverse array of choices in retirement plans and as an employee, you might not have been fully utilizing the options you have available. This brief overview does not include “special executive compensation” plans that can be created to enhance the ability of business owners and highly compensated key employees to save for their retirement. Asking the right questions is the first step toward implementing the right plan for your future or your company. Now be sure to ask your accountant, qualified financial advisor or business retirement plan consultant about your options today!

 

Citations

1 bankrate.com/finance/taxes/retirement-plan-contribution-limits.aspx [1/5/11]

2 irs.gov/retirement/article/0,,id=119625,00.html [10/28/10]

3 irs.gov/retirement/article/0,,id=108948,00.html [10/8/10]

4 fidelity.com/static/dcle/ira/documents/401K-CW-0902.pdf [4/7/11]

5 smartmoney.com/personal-finance/retirement/understanding-the-roth-401k-17679/ [2/2/10]

6 kiplinger.com/businessresource/forecast/archive/DBk_pension_of_future_090819.html [8/19/09]

7 bankrate.com/finance/retirement/where-to-find-income-for-retirement-1.aspx [3/9/10]

8 irs.gov/retirement/article/0,,id=111419,00.html [2/3/10]

9 irs.gov/retirement/article/0,,id=111403,00.html [1/26/11]

10 tiaa-cref.org/public/calcs/keogh_contrib/index.html [4/7/11]

About the Author

Mr. Petiri is a Registered Investment Advisor. His nearly two decades of financial experience covers virtually all areas of finance from tax, insurance, stockbroker, personal financial planning and personal banking to corporate credit, business planning and consumer lending. His career positions include MBNA America Bank, the Internal Revenue Service and American Express Financial Advisors, Inc.

Fidelity $50 (March). By King. Arranged by Glover. Command Series. Grade 2.5. Score and set of parts. Composed 2011. Duration 2 minutes, 20 seconds. Published by C.L. Barnhouse

Calculator Regular $39 Calculator Regular

Fidelity Necklace $140 What sets this rhodium-plated necklace apart is its unique shape. It features shimmering bezel-set clear crystal chatons. With this elegant creation, you can be sure that all eyes will be on you!

Retirement Whirls Pkg/5 $3.99 The Retirement Danglers feature a red foil whirl with two-sided card stock retirement cutouts attached. One side of the retirement whirls reads “Retired and the other side “Now the Fun Begins”. Each of the Retirement Danglers measures 30 inches and comes in a package of 5. Decorate the ceiling of any retirement party with these colorful hanging decorations.

Credit Card Calculator $3.99 This new creditcard calculator is perfect for Home, office or school and is small enough to fit into almost anything. This extremely lightweight mini calculator is no bigger that a credit card. Calculator automatically turns off to prolong it’s long-life battery.

Happy Retirement Fanci-Fetti Each $1.99 The Happy Retirement Confetti features confetti pieces cut into the words “Happy Retirement”. This colorful multi-color retirement confetti comes in packages of 1/2 ounce. Sprinkle the confetti on your party table or add a pinch to your retirement party invitations.

Calculator Key Chain $2.99 This new key chain calculator is perfect for the home, office, school or anywhere you go! Never go without a calculator again! Keychain calculator is extremely lightweight with a flip up key protector. Calculator automatically turns off to prolong it’s long-life battery. Keychain calculator features: 8 Digit Read out Sure touch rubber keys Auto Power Off Long-Life Battery Protective cover

Retirement Tiara Each $4.99 This Retirement Tiara is full of plastic gems with the words Officially Retired in the center. Each Plastic Retirement Crown measures 4 3/4 inches wide x 5 1/4 inches long x 3 1/2 inches high. Give the most unique gift to the female retiree when you present her with this beautiful Retirement Tiara so she continues to shine brightly.

eInvite.com Traditional Frame Retirement Party Anniversary $1.25 eInvite.com Traditional Frame Retirement Party Anniversary:

Multifunction Calculator Tape Measure $9.99 The Multifunction Calculator Tape Measure is finally here at bewild. This New Gadget is perfect for around the house or any construction worker or handiman. Our Multifunction Calculator With Tape Measure comply with International Quality Standards and their quality and durability are fully guranteed. How Could any one not have this new item! The Multifunction Calculator Tape Feature: 8 Digit Calculator 3m Tape Measure Built In (Post-It) Memo Pad Size:71x66x39mm Get Your Own! See Comments

Silver Plated Calculator $21.5 Silver plated calculator measures 35" x 25" when closed 

Happy Retirement Sign Banner Each $4.99 The Happy Retirement Sign Banner features “Happy Retirement” in green, yellow, blue and red letters on a blue background with multi-colored confetti pattern. Each of the all-weather retirement banners measures 63 inches x 21 inches and has grommets in it’s four corners. Hang this colorful banner on porches, above entreances and more.

Happy Retirement Cubicle Decorating Kit Each $8.99 Our Happy Retirement Cubicle Kit is a great way to show your respect to a fellow co-worker as they have reached retirement. Each retirement cubicle kit features bright colors in red, blue, yellow and purple and contains eight happy retirement balloons, one large retirement banner, three cut-outs and one small retirement banner. You can use this Happy Retirement Cubicle Kit to decorate an office cubicle, work desk or doorway or use this kit at home for a retirement party.

eInvite.com Corkscrew Party Retirement $1.25 eInvite.com Corkscrew Party Retirement: Perfect for any wine event.  The wording on the right and the left of the corkscrew can be customized for any special celebratory event or for a wine tasting themed party.  Printed on thick white stock, you choose the font and ink color for your text.  A high end stylish invitation at an amazing price!

Checkerboard, Ltd. Fidelity Thank You Note Stationery Bar & Bat Mitzvah $1.19 Checkerboard, Ltd. Fidelity Thank You Note Stationery Bar & Bat Mitzvah:

Retirement Party Music Cd Each $12.99 Our Retirement Party Music CD will give any retirement party an up beat, festive mood. Each retirement music CD includes fourteen funtastic songs and has a play time of over 46 minutes. Use the Retirement Party Music CD to liven up any retirement party and celebrate this milestone in your retirees life. Retirement Party Music CD includes: Ain’t No Stoppin’ Us Now (I’ve had) The Time of My Life Celebration Take This Job and Shove It Workin’ for a Livin’ Takin’ Care of Business What I Like About You Bang on the Drum All Day Dancing in the Street Morning Train (9 to 5) The Good Life Permanent Vacation Adios And the Pursuit of Happiness

eInvite.com Journeys Party Retirement $1.25 eInvite.com Journeys Party Retirement: Your photo will be printed on high-quality paper with a non-glossy, premium matte finish. This subtle card in neutral tones accentuates your photo. Suitable for any number of events, from a party to a save the date to a birth announcement. Your personalization is available in your choice of ink colors. Prices include blank white envelopes.

Fidelity Blue Ring $97 What sets this rhodium-plated ring apart is its unique shape. It features a refined gradation of pale blue and clear crystals in a bezel setting. Delicate and easy to wear, it combines perfectly with the matching necklace or bracelet.

Fidelity Silk Necklace $69 What sets this gold-plated necklace apart is its unique shape. It features a feminine gradation of golden and clear crystals in a bezel setting. Delicate and refined, this sophisticated piece combines beautifully with the matching ring or bracelet.

Fidelity Silk Bracelet $99 With a unique silhouette, this gold-plated bracelet presents a feminine gradation of golden and clear crystals in a bezel setting. Delicate and easy to wear, it combines perfectly with the matching necklace or ring.

Fidelity Silk Ring $97 What sets this gold-plated ring apart is its unique shape. It features a feminine gradation of golden and clear crystals in a bezel setting. Delicate and easy to wear, it combines perfectly with the matching necklace or bracelet.

Fidelity Blue Necklace $69 What sets this rhodium-plated necklace apart is its unique shape. It features an elegant gradation of pale blue and clear crystals in a bezel setting. Delicate and easy to wear, it adds a refreshing splash of color to any outfit.

Fidelity Blue Bracelet $99 With a unique silhouette, this rhodium-plated bracelet presents a refined gradation of pale blue and clear crystals in a bezel setting. Delicate and easy to wear, it combines perfectly with the matching necklace or ring.

Fidelity Pierced Earrings $61 A glamorous set of rhodium-plated pierced earrings with bezel-set clear crystal chatons that play with light in magical ways! The earrings come as a pair.

High-Fidelity-Mikrofon (schwarz) $9.1 Highlights: hochwertiges Mikrofon ideal für die Aufnahme, Singen oder Sprechen zu Ihrer Familie oder Freunden über das Internet Standard 3,5 mm Audio-Klinkenanschluss Spezifikation: Farbe: schwarz Eingang: 3,5 mm Abmessungen: 5,59 x 1,57 in in x 1,57 in Gewicht: 10,51 Unzen Packungsinhalt: 1 x Mikrofon

High Fidelity Microphone (Black) $12.6 Highlights:High quality microphoneGreat for recording, singing or talking to your family or friends via the InternetStandard 3.5mm audio jack connectionSpecification:Color: BlackInput: 3.5mmDimensions: 5.59 in x 1.57 in x 1.57 inWeight: 10.51 ozPackage Contents:1 x

Happy Retirement Latex Printed Balloons Pkg/6 $1.99 Our Happy Retirement Latex Balloons feature a white logo which says HAPPY RETIREMENT surrounded by an airplane, boat, car, TV, palm tree and sun. These two sided retirement balloons are sold in packages of six and measure approximately 12 inches when inflated. Each package contains an assortment of colors which may include: red, light blue, pink, yellow, orange, green, royal blue and lavender. Our Happy Retirement Latex Balloons may be used to create beautiful tabletop centerpieces by simply adding additional latex balloons, mylar balloons, curling ribbon and a balloon weight.

eInvite.com New Outlook Party Retirement $1.25 eInvite.com New Outlook Party Retirement: Your photo will be printed on high-quality paper with a non-glossy, premium matte finish. Frame your photo in light blue and white. Suitable for any number of events, from a party to a save the date to a birth announcement. Your personalization is available in your choice of ink colors. Prices include blank white envelopes.

eInvite.com A New Beginning Party Retirement $1.25 eInvite.com A New Beginning Party Retirement: Your photo will be printed on high-quality paper with a non-glossy, premium matte finish. This card, in neutral tones, highlights your photo. Suitable for any number of events, from a party to a save the date to a birth announcement. Your personalization is available in your choice of ink colors and fonts. Prices include blank white envelopes.

Easy Grip Multifunction Tape Measure Calculator With Flashlight $11.99 The Easy Grip Multifunction Tape Measure Calculator With Flashlight is finally here at bewild. This New Gadget is perfect for around the house or any construction worker or handiman. Our Multifunction Calculator With Tape Measure comply with International Quality Standards and their quality and durability are fully guranteed. How Could any one not have this new item! The Multifunction Calculator Tape Feature: 8 Digit Calculator 3m Tape Measure High Lighteness LED Torch Flashlight Easy Grip Hand Grip Get Your Own! See Comments

Heavy Duty Multifunction Tape Measure Calculator With Level $11.99 The Heavy Duty Multifunction Tape Measure Calculator With Level is finally here at bewild. This New Gadget is perfect for around the house or any construction worker or handiman. Our Multifunction Calculator With Tape Measure comply with International Quality Standards and their quality and durability are fully guranteed. How Could any one not have this new item! The Multifunction Calculator Tape Feature: 8 Digit Calculator 5m Tape Measure Guide Light for Tape Measure Gradienter (Level) Get Your Own! See Comments

Starfish & Dreams Nautical Flags Party Retirement $1.65 Starfish & Dreams Nautical Flags Party Retirement: Having a party at the Yacht Club, out on the water or just dockside, this is the perfect invitation. Fly your flags high and enjoy!

High Fidelity Save the Date Cards $1.66 Photos get stacked like a game of Tic-Tac-Toe on these save the date cards. So playful and endearing.

High Fidelity — A Musical (Vocal Selections) $21.99 By Tom Kitt, lyrics by Amanda Green. For Keyboard; Piano; Voice. This edition: Piano/Vocal. Book; Piano/Vocal/Chords; Shows & Movies. Broadway. 160 pages. Published by Alfred Music Publishing

Meri Meri Black Rectangles Envelope Party Retirement $4.24 Meri Meri Black Rectangles Envelope Party Retirement: Surprisingly elegant, glittering blocks of black and spectrum sparkles cover these envelope styled invitations with a slim, black ribbon detail. A shimmering grey insert conveys all of your event information. Coordinating grey envelopes accompany.

The Paperdoll Store Tea Party Invites Party Retirement $1.25 The Paperdoll Store Tea Party Invites Party Retirement: What better way to celebrate yourself and your friends than a high tea! Treat yourself like a queen with our very own Tea Party Invites. Printed on thick white stock, you choose the font and ink color for your text. A high-end stylish invite at an amazing price!

eInvite.com Blue/Green Dots Party Retirement $1.25 eInvite.com Blue/Green Dots Party Retirement: Your photo will be printed on high-quality paper with a non-glossy, premium matte finish. This stunning card features a subtle dot pattern in shades of blues and greens. Suitable for any number of events, from a party to a save the date to a birth announcement. Your personalization is available is in your choice of ink colors and fonts. Prices include blank white envelopes.

Alonzo Mourning Miami Heat Autographed Dual Photograph Retirement Collectible $425 Commemorate Alonzo Mourning’s retirement with this hand-crafted collectible from Mounted Memories. Each piece features two 11×14 photos- one autographed from the jersey retirement evening and one “Zo” action photo. It also includes a Miami Heat laser cut logo- a Zo retirement logo and a descriptive text insert- all double matted and framed in black wood. Framed dimensions: 24″ x 31″ x 1″. Limited edition of 33.

Eveready energizer 3V watch/calculator batteries model: ecr2430bp – 6 ea $9.44 Eveready energizer 3v watch/calculator batteries model: ecr2430bp designed to power smaller electronics for hours and hours.

3.5mm High Fidelity Stereo Headphone HY-338 with Microphone $15.99 Specifications:       * Stereo headphone and microphone are integrated together       * Designed to be lightweight and comfortable headphones fit for extended use       * Compatible with all your 3.5mm jack devices       * You can use this stereo heaphone at home and in your office       * Soft and comfortable material will not send a terrible pain to your head and ears Specifications: Headphone:     * Frequency Range: 20Hz ~ 20,000Hz     * Sensitivity: 116dB     * Impedance: 32 ohms     * Max. Power Input: 25mW     * Jack: 3.5mm  Microphone:     * Sensitivity: -58dB ± 2dB     * Impedance: 2.2K ohms

Del Boca Vista Retirement Community (Seinfeld) T-Shirt $14.99 If Kramer can move into the Del Boca Vista retirement community, then so can we! Free Willard tip calculators for every resident. A fun tshirt for Seinfeld fans. Small text reads: “Where older people go to die.” This quality t-shirt is khaki sand tee with orange print. Enjoy!

Tags: fidelity investment retirement calculator, fidelity retirement income calculator, retirement calculator fidelity, retirement savings calculator fidelity

This entry was posted on Saturday, October 8th, 2011 at 1:11 pm and is filed under Seniors. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.