Retirement Planning for Small Businesses

Providing a retirement plan for your business can be beneficial to both you as an owner and your employees.  With the move away from pension plans many individuals will be relying more heavily on their own savings to provide income during retirement.  One of the best tools we have to create retirement savings is a plan through their employer. 


If you are considering creating a retirement plan for your small business you have several options.  Below will be a discussion about a few of those options.  This is not an exhaustive list and there may be some plan types that will benefit you more than another.  Prior to implementing a plan you should consult with a knowageable professional (financial advisor and tax advisor) who can help you select the plan that will best fit your small business.  The contribution limits and tax deductions can vary from plan to plan and year to year. So, it is advised to work with a trusted advisor.


SEP IRA- The Simplified Employee Pension IRA or (SEP IRA) for short is a nonqualified retirement plan that your small business can implement to put money back for retirement.  This plan is 100% funded by you the Employer and the contributions are immediately vested in the account.  Employees do not make contributions into it and if they separate service for any reason the employee will retain all of the funds in their SEP accounts.  The benefit to the employer is that they are not required to make a contribution on an annual basis.  So if you have varying cash flows from year to year this may be a plan worth considering.  These plans are easy to establish and require little work to maintain. 


Simple IRA- If you are looking for a plan that will allow employee and employer contributions the Simple IRA should be considered.  This plan will allow employees to contribute up to a certain dollar amount (see plan limits set by IRS) and will require the employer to contribute either a match of at least 3% of the employee contributions or 2% of employee’s salary.  Remember the Simple IRA gives immediate vesting to employees.  This is also a low cost plan to maintain and easy to establish. 


Traditional 401K- The traditional 401K is a qualified plan and will be required to preform and meet testing requirements each year so it is a more expensive plan to establish and maintain.  However, it will allow both employee and employer contributions.  Also, unlike the SEP and Simple IRAs the 401k plan can be established with a vesting schedule determined by the employer.  This plan will give you the small business owner the greatest amount of flexibility regarding vesting and matching contributions. 


There are also additional types of 410ks that a small business can establish to help reduce the annual testing requirements such as a Safe Harbor 401k and an Automatic enrollment 401k.  The Safe Harbor makes employer contributions a requirement, which will eliminate the need for nondiscrimination testing.  An Automatic enrollment 401k will automatically enroll employees.  Then the employee can adjust their contribution amount or opt out of the plan.  This will eliminate the nondiscrimination-testing requirement as well.  While these plans will reduce the amount of required annual plan testing they will not eliminate all testing requirements. 


Roth Plans- Roth plans can be used in conjunction with 401K plans or IRAs plans.  The Roth plan type will alter the taxability of the plan funding.  With the other plans discussed the contribution to each plan will be made pre-tax and will grow tax deferred.  The Roth plan type taxes the contribution on the front side (at time of contribution) and then plan assets will grow tax deferred and can be withdrawn during retirement tax free. 


It should be noted that taking distributions from any plan prior to age 59 ½ could have negative tax consequences and/ or tax penalties.  Please discuss the distribution rules with a financial advisor or tax advisor/CPA prior to making a distribution to ensure understanding of the tax impact to your situation.


Small business owners can greatly benefit from the establishment of a retirement plan and they have many options to consider when making a selection.  Business owners should work to find the best plan suited to their needs and the needs of their employees.

Heather Castle

I am originally from Virginia and grew up in Tuscaloosa, Al.  I completed both of my degrees at the University of Alabama.  My undergrad degree in Finance and then later my MBA from the Manderson Business School through their Executive MBA program. 

I started Castle Wealth Advisors, LLC because I wanted to provide ethical and approachable financial planning and investment management to individuals and business owners, concerned with their financial futures, regardless of age, sex, race, or net worth.

I've always believed clients should work with reputable, qualified, and experienced advisors.  So it was important to me to gain industry experience as well as pursuing additional industry specific designations.  I have passed the following licensing exams:

     Series 7, General Securities Representative

     Series 66, Investment Advisor Representative 

     Series 9 & 10, General Securities Sales Supervisor

     California Life, Health, and Variable Insurance (License #0K01554)

I have been in the financial services industry since 2006 and have work with many differing type of clients over the years.  One thing I know to be true, everyone wants to feel heard and cared about.  Meaning everyone I have ever worked with wants to feel like their desires, wants and needs have been heard and taken into consideration when speaking about their personal financial matters.

Many people have the same goals, they just express them differently, and then there are a few who’s view and desires are completely different.  This is one of the aspects I love about my job.  The PEOPLE!  I get to meet some many interesting people and they challenge me daily.  No day in my line of work is the same.  Today I could be planning for a family who owns a small business and tomorrow working with a women going through a painful divorce.  Listening and building financial plans and strategies around personal needs is why many of my clients have said they do business with me and have stayed with me. 

Another reason I love my job… I get to truly HELP people.  I get to make a living and provide for my family while helping others.  Over my career I have felt a need to dive deeper into financial planning and working with high net worth individuals who have greater planning and investing needs.  Listed below I have highlighted a few of the areas I specialize in:

·      Women in transition (divorce/ death)

·      Corporate Executives

·      Young Entrepreneurs

·      Small Business Owners

·      Family with Special Needs Members

·      Complex Retirement and Estate Planning Needs

Currently I live in Brentwood and really enjoy the West Side of Los Angeles.  I am actively involved with the Junior League of Los Angeles.  I have a passion for trying new things and new experiences.  So, in my free time I love traveling and scuba diving.  I also am interested in learning French, taking pilot’s lessons and dancing the tango!