Set Up a Simple Pension Plan and IRA (1)
by adminAnother way to shift income to family members is by adopting a simple pension plan. Without question, setting up a 401(k), or some other type of profit-sharing plan, is one of the best tax-saving strategies available to a home-based business owner.
Set up in 1997 by Congress in an effort to eliminate some of the cumbersome requirements of a qualified pension plan, the “simple” IRA plan is a written arrangement that provides you and your employees with an easy way to make contributions towards retirement. Under such a plan, any employee may choose between making salary deduction contributions or receiving a salary. Here’s what you need to know about setting up a simple plan:
• Unlike a qualified pension plan, if you are a sole proprietor, you can participate in a simple plan.
• If you do set up a simple plan, you must make matching contributions
on behalf of each employee if they contribute to the plan.8
• As the employer, you must make matching contributions to your employees’ contributions of up to 3 percent of compensation* each year, or as little as one percent for two out of five years.9
Taken from : Money Mastery “10 Principles That Will Change
Your Financial Life Forever
