Creating a quality retirement plan is important if your business is trying to attract and retain top talent. Employees want to invest their time in a company that helps them plan for a secure financial future. If your business doesn’t offer a retirement plan, you have several options to choose from. Read about some of the options you can invest in, which will allow your employees to adequately plan for their future.
The most traditional retirement savings plan is an IRA. There are two types employees can invest in, depending on their individual needs. With a traditional IRA, employees will reduce their taxable income and allow their savings to grow tax-free until it’s time to withdraw. There are contribution limits that can change each year, but are generally generous enough to fit most people’s needs. When it’s time to retire, your employees will pay taxes on the money they withdraw.
With a Roth IRA, employees will pay taxes on their contributions but can withdraw their money tax-free once they’ve retired. While this may seem like a better option, there are several factors to consider when choosing between the two plans, such as the tax bracket employees expect to be in. Early withdrawal penalties are also different and should also be considered.
By offering both plans, you’ll allow your employees to make an informed decision about which plan makes the most sense for their future goals. Be sure to talk to your employees about the different options and pros and cons of each so they can make an educated decision. Experts like offer great tools to help employers understand the nuances of these retirement plans.
Another popular retirement plan option is the 401k. With a 401k, your employees contribute a certain portion of their paycheck with the expectation that you’ll also match their funds up to a certain percentage. While there are more nuances involved with managing a 401k, it can be an attractive part of a when people are considering employment with your company.
Like a traditional IRA, funds in a 401k will grow tax-free until they’re ready to be withdrawn. Employees are not permitted to withdraw funds before age 59 1/2 or else they may face hefty early withdrawal fees. The yearly contribution limits on a 401k are much higher than an IRA, so if you have employees who want to contribute more to their retirement, this is an attractive option to consider.
A much less common option, pensions are another option to consider implementing to assist with your employees’ . A pension is often provided to employees at no additional cost to them and is entirely employer-funded. This can help supplement a 401k or IRA plan to maximize an employee’s income in retirement. Offering a pension as part of a compensation package may help you attract top talent.
Once you put a retirement plan in place, you should revisit it occasionally to make sure it still meets your employees’ needs. By helping your employees prepare for their future, you are demonstrating you care about their financial security and want to see them succeed even after they’ve retired from your company.