Benefits of Establishing a Corporate Retirement Plan

January 15, 2019 10:57 pm Published by Comments Off on Benefits of Establishing a Corporate Retirement Plan

Summit Group Retirement Planners, Inc. – Retirement in America

Benefits of Establishing a Corporate Retirement Plan

The IRS published a short article discussing some of the benefits of starting a retirement plan on October 29, 2018. I will be summarizing some of the key points and discuss their application in the workplace.

A few important metrics to keep in mind as provided by the IRS:

  • * Retirement can last for 30 or more years as people are living longer with improved sickness prevention and medical advances;
  • * An individual might need upwards of 80% of their current annual income when they retire to maintain a comfortable lifestyle;
  • * The Social Security Administration pays an average monthly benefit of $1,200.

With that said, being able to save for retirement with a sound financial plan becomes very important for hard working Americans that are facing potentially a long period of time in retirement. Employers can help support their employees by creating a retirement program for their employees. There are benefits for business owners and for employees when a retirement plan is offered by an employer. These benefits will be discussed below:

Employer benefits for offering a retirement plan:

  • * Employer contributions in the form of profit sharing, and matching are tax deductible;
  • * If the employer pays for the Recordkeeping, Third Party Administration or Advisory Fees out of pocket, they can also take a deduction for those expenses; (We recommend this as a best practice to our clients when they have the financial ability to do so);
  • * Assets in the plan grow tax-free;
  • * There are a variety of plan options and programs that can make offering a retirement program more advantageous;
  • * There are tax credits and other potential incentives business owners can receive for starting a retirement plan that can contribute to reducing expenses (consult a tax professional for specific tax credits and deductions advice);
  • * A retirement program can be utilized as a recruitment and retention tool to attract and retain stronger employees in a competitive hiring environment.
  • Employee benefits of having access to a retirement plant:
  • * The contributions or deferrals of the employees can reduce their current taxable income;
  • * There is an option to have these contributions and their investment gains be not taxed until distribution under the traditional form of deferral;
  • * There can also be an option added called a ROTH deferral, that results in having the contributions taxed at the time of deferral into the plan, but allows the investment earnings to grow tax-deferred and be withdrawn tax-free at retirement;
  • * Making contributions through payroll deductions are easy for the employee as they don’t have to consciously set up a deduction or write a check monthly from their own bank account as they would with an Individual Retirement Account (IRA);
  • * Compounding interest over a period of time helps small consistent contributions to potentially grow into significant savings;
  • * The retirement plan is portable meaning the employee can transfer their account to the next employer or their own IRA when service is terminated;
  • * Having access and contributing to a workplace retirement program can help the employees improve their financial security and create more stability in retirement;
  • * Certain employees will qualify for a Saver’s Credit depending upon their income (consult a tax professional for specific advice).

Summit Group Retirement Planners, Inc. – Key Takeaways

There are many benefits to offering a workplace retirement plan and we touched on a few in this article. As employees save and put themselves into position to retire financially, that provides several benefits. Morally both the employer and employee can feel good about the fact that retirement can be attained at the end of a long working career. From a financial standpoint, it is good for both parties as the employee can live out their dreams in retirement and continue to provide for themselves and their family. Companies then have the ability to invest their resources into hiring younger employees and continue the cycle of helping those employees and their families build for their future retirement. These are ideal outcomes and of course, never guaranteed. However, they are goals that we can all collectively as employer and employee, aspire to, and strive to accomplish.

Further Reading

For further information, please contact Summit Group Retirement Planners, Inc. Representative: 267-433-1051 or Dfiorenza@sgretirementplanners.com. Summit Group Retirement Planners, Inc. specializes on collaborating with employers on the design features, installation assistance, and ongoing servicing needs of their retirement programs.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Investment advice offered through Summit Group Retirement Planners, Inc., a registered investment advisor.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax-free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Author: Derek Fiorenza – COO/CCO Summit Group Retirement Planners, Inc.

References https://www.irs.gov/retirement-plans/plan-sponsor/lots-of-benefits-when-you-set-up-an-employee-retirement-plan


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This post was written by Tiffany Bellamy

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