Comprehensive Guide to Small Business Retirement Plans by Schwab

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Comprehensive Guide to Small Business Retirement Plans by Schwab

Individual 401(k)—Traditional and Roth

The Individual 401(k) plan offered by Schwab is tailor-made for owner-only businesses with no employees. This plan boasts key features such as traditional and Roth salary deferral contributions, high contribution limits, and flexible annual contributions. Both the employer and employee, who is also the owner, can make contributions to this plan, making it a versatile option for small businesses looking to save for retirement.

SEP IRA

For owner-only businesses or those with employees, the SEP IRA is a solid retirement plan option. With no IRS filing or reporting requirements, this plan allows for employer contributions for eligible participants. Contributions to the SEP IRA are made by the employer only, providing a straightforward and hassle-free saving mechanism for retirement.

SIMPLE IRA

The SIMPLE IRA plan is suitable for businesses with up to 100 employees. This plan is funded primarily by participant salary-deferral contributions, with the added benefit of employer-matched contributions up to 3%. Both the employer and employee can contribute to this plan, fostering a collaborative approach to retirement savings within the organization.

Personal Defined Benefit Plan

Small businesses, including owner-only businesses or those with up to five employees, can benefit from the Personal Defined Benefit Plan. Offering the highest contribution limits, contributions to this plan are generally 100% tax deductible. This plan helps individuals target their desired income level in retirement, providing a strategic approach to retirement planning.

Business 401(k)

Businesses of any size, typically with over 100 employees, can opt for the Business 401(k) plan. This plan allows for a higher level of salary deferrals by employees compared to other plans, alongside optional annual employer contributions and greater plan customization. Both the employer and employee can contribute to this plan, making it a comprehensive retirement solution for larger organizations.

Company Retirement Account

Designed for businesses with an established retirement plan and recordkeeper/third-party administrator, the Company Retirement Account offers an investment-only solution. It provides access to Schwab's full range of investment options, allowing both the employer and employee to invest and grow their retirement savings. This plan is ideal for businesses looking for diversified investment opportunities within their retirement plan.

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