Small Business Owners: When is the Right Time to Begin Saving for Retirement?

As a business owner, you are juggling lots of balls in the air. One important decision to make is which type of retirement account you should invest in. To begin: are you running any of the following types of businesses?

Small businesses that should consider an Individual 401(k) Plan:

• Owner-only businesses
• Any business that employs just owners and their immediate family members (i.e., spouses and minor children) – including C corporations, S corporations, partnerships and sole proprietors
• Any business that employs the owner and other part-time employees where the part-time employees may be excluded from plan participation
• Defined benefit plan sponsors who would like to contribute even more than what they can to their existing plan by making a 401(k) salary deferral

You may ask, what are the tax benefits of an Individual 401(k) plan?

An Individual 401(k) plan can provide tax deductions on employer contributions for businesses and on salary deferred by employees, sole proprietors, and other small business owners. These traditional contributions grow on a tax deferred basis, meaning that no income tax is owed by the 401(k) participant until the money is withdrawn from the account.

Individuals can also opt to defer salary on an after-tax basis to a designated Roth account in the Individual 401(k). Unlike a Roth IRA, which precludes individuals above certain income limits from making a contribution, all Individual 401(k) participants are eligible to defer salary to the designated Roth 401(k) account provided the Individual 401(k) document allows for such deferrals.

An Oppenheimer financial advisor can help you evaluate if a 401 (k) is best for you and your business. Click here to find an advisor today.