Retirement Plans

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ANDREW BECKWITH: Hello. My name is Andrew Beckwith, and I work for the Internal Revenue Service. Did you know that setting up a retirement plan has many benefits for you, your business, and your employees? First, offering a retirement plan helps you attract and retain good employees, avoiding the high cost of hiring and training new workers. Second, the plan helps everyone save money on taxes. Your contributions to the plan are usually deductible right away, and your employees don´t pay tax on the money until they take withdrawals, usually in retirement. Third, your assets grow tax-deferred in a retirement plan. These compounded earnings allow small, regular contributions to grow over time to significant retirement savings. And last, your business may be eligible for valuable tax credits or incentives when you start a new retirement plan. You can choose from many types of retirement plans, including some that are easy to set up and operate. For example, plans that use individual retirement accounts for each employee can be good, low-cost options. A Savings Incentive Match Plan for employees, or SIMPLE IRA plan, allows employees to defer part of their salary in IRAs. You, the employer, must also contribute either a 3% match or 2% of compensation to each employee´s account. A Simplified Employee Pension, or SEP, Plan only allows contributions by the employer with no employee salary deferrals. The employer contributes up to 25% of compensation to each employee´s SEP IRA, and each employee must receive the same percentage of compensation. As an alternative to these plans, you can also contribute directly to employees´ IRAs using a payroll deduction arrangement. Employees decide how much they want to contribute to their own Traditional or ROTH IRAs. The IRS has many resources on our website to help you choose a plan and keep it running smoothly. Just visit and click on "Choosing a retirement plan." Thank you.