Pat Grenier, RR, CFP®, MBA… Contributing Writer
Grenier Financial Advisors
The third quarter is fast approaching. Schools will be back in session soon. The trees (can you believe it?) are starting to display the beauty of their fall colors. We are settling into life after a summer of finally being able to join the rest of civilization and leave our quarantine quarters.
As we get back and settle into work and focus on our businesses it is a good time to look back at 2021, review and prepare for the end of the year. Deadlines are approaching for business owners to assess corporate or self-employed retirement plan options.
If you currently have a plan:
• Will this plan meet your needs in 2022?
• What are your other options?
• Have I and my employees maximized our contributions including the over 50 catch-up?
• Has our business met our matching obligations?
• How much will the employer match for 2022? – The deadline to decide and notify your employees of your 2022 matching contribution for your SIMPLE/IRA is November 1st
If you currently do not have a plan:
This is the starting point:
• Do I have excess funds that could be sheltered?
• How much can the business afford to contribute for owners and employees?
• How many employees do you have?
• Is the business income consistent or does it fluctuate?
The next step:
• Review the different plan options
o Defined Benefit Plan – Best for professional businesses with few employees, such as Law Firms, Medical Practices, etc. It allows contributions of up to $230,000 for 2021.
o 401k Plans – Both employer and employee contributions. The plan design is flexible, it requires discrimination testing unless it is a SOLO plan. The contribution limits are $19,500 plus an over 50 catch-up of $6,500. The deadline to establish the plan is the last day of the fiscal year. Can be set up in combination with a Profit-Sharing Plan.
o SEP/IRA Plans- A good option for self-employed and small business owners who want an easy/inexpensive plan. It is an employer contributory plan only. Maximum contribution limit is the lesser of 25% of compensation or $58,000. The same percentage mut be contributed to all participants. The deadline to establish the plan is the employer’s tax filing deadline including extensions.
o SIMPLE/IRA – This plan is ideally suited as a startup retirement plan. Contributions are made by employees with a flexible employer match. It does not require cumbersome IRS filing; it is low cost and low maintenance. The deadline to establish the plan is October 1st. The current annual contribution limit is $13,500 with a catch-up contribution of $3,000 for those over 50.
Confused? It is understandable. There are many factors that need consideration before deciding and establishing a plan that need to be discussed with a Financial Professional.
If you would like to discuss retirement plans for your business with me, please give my office a call.
Grenier Financial Advisors
Springfield, MA Office: (413) 736-6712
Wethersfield, CT Office: (860) 721-7880
Securities and advisory services offered through Cadaret Grant & Co., Inc., an SEC Registered Investment Adviser and member FINRA/SIPC. Grenier Financial Advisors and Cadaret Grant are separate entities.