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44 Glass Magazine® ; July/August 2010
Ready to retire?
Plan options for glass
company owners
By Jesse Abercrombie
If you own a glass company, you have a lot to think about: sales, expenses, marketing, cash flow, competition;
the list goes on. By spending so much
time on the issues of today, you may
overlook the concerns of tomorrow.
;at’s why, if you haven’t already done
so, you need to choose a retirement plan
for your business.
Which plan is right for you? It
depends on di;erent factors, such as
how many employees you have and
how much you can a ;ord to contribute
to a retirement plan each year. Let’s
take a look at some popular retirement plans for small businesses.
Owner-only 401(k)
;e owner-only 401(k) option is really
good if you’ve worked for a larger glass
company for years and have decided to
set up shop on your own. Also known
as an individual 401(k), an owner-only
401(k) o;ers many of the same advantages of a traditional 401(k): a range
of investment options, tax-deductible
contributions and tax-deferred earnings
growth. You may even be able to choose
a Roth option for your 401(k), which allows you to make after-tax contributions
that can grow tax-free. In 2010, you can
contribute up to $49,000 to your owner-only 401(k) or $54,500 if you’re 50 or
older. To make deductible contributions
for the 2010 tax year, you will need to
set up your plan by Dec. 31, 2010.
Solo defined benefit plan
You may think you have to work for a big
company to participate in a traditional
pension plan, also known as a defined
benefit plan, but you can set one up for
yourself if you’re self-employed or own
your own business. ;is plan has high
contribution limits, which are determined
by an actuarial calculation, and your
contributions are typically tax-deductible.
SEP IRA
If you have just a few employees or are
self-employed with no employees, and
are looking for a low-cost, low-mainte-nance retirement plan, you may want
to consider a SEP (Simplified Employee
Pension) IRA. You fund the plan with
tax-deductible contributions, and you
must cover all eligible employees as
employees themselves cannot contribute.
You can contribute up to 25 percent
of compensation if you’re an employee
of your own corporation, or 20 percent of income if you’re self-employed,
up to $49,000 annually. And you can
fund your SEP IRA with virtually
any type of investment you choose.
SIMPLE IRA
As its name suggests, a SIMPLE (Savings
Incentive Match Plan for Employees) IRA
is quite easy to set up and maintain, and
it can be a good plan if your business has
fewer than 10 employees. As the business
owner, you must contribute in one of
two ways: a dollar-for-dollar match of up
to 3 percent of salary or a contribution
of 2 percent of employees’ salaries, up to
$4,900 per year. Employee contributions
are tax-deductible, and your matching
contributions are generally deductible as a business expense. Still, while a
SIMPLE IRA might be advantageous
for your employees, it’s less generous to
you, as far as allowable contributions,
than an owner-only 401(k), a defined
benefit plan or a SEP IRA. For 2010,
your annual contributions are generally limited to $11,500, or $14,000 if
you’re 50 or older by the end of the year.
You can also make a matching contribution of up to 3 percent to yourself.
To determine which plan is best for
you, consult with your tax adviser and
a financial adviser who has experience
with construction small businesses.
The author is a financial advisor for Edward Jones
Investments, Dallas. Write him at jesse.abercrom-
bie@edwardjones.com.
