5 Best Retirement Plans For Partnerships
The five best retirement plans for partnerships stem from certain, little-known facts about retirement plans you may not know. For instance, individuals in a partnership may qualify for self-employed plans, single partnership plans. With all these possibilities, read this list of the five best retirement plans for partnerships, and get a clearer picture.
- Profit-sharing 401k. A big feature of a 401k is the elective deferral, which is basically an amount that any participant in the plan can take out as pay but decides to put in instead. The benefit of this feature is that the business nor the participant pays any income tax because it is regarded as a business deduction.
- Money-purchase plan. These plans are similar to profit-sharing ones, except they feature disadvantages such as limited withdrawals until retirement, no elective deferrals and a requirement for your business to contribute, even in years it fails to make profits. With these considerations to ponder over, a money-purchase plan may be too unattractive.
- Defined benefit plan. Defined benefit plans obligate businesses to promise a specific amount each year, called an annuity, that you will get when you retire. A possible drawback here is that such plans only pay at retirement age or even thereafter.
- SEP plan. SEP plans are plans in which employers contribute to plans owned by the employees. This concept extends also to partnerships, or people who are self-employed or are counted as partnerships. Since self-employed people are both employer and employee, at least in retirement plan parlance, you can make a tax-deductible contribution to yourself.
- SIMPLE IRA plan. A SIMPLE IRA plan works in two ways. One, through elective deferrals, by the employee out of salary and, two, by the employer as a matching contribution. Again, like the SEP Plan above, this extends to the concept of the self-employed people and partnerships as well.