Employers can benefit from a retirement plan for their business and/or their employees in terms of the financial security and as well as the tax advantages it provides. Experts estimate that an American taxpayer will need between 70 to 90 percent of their pre-retirement income to maintain their present standard of living after retirement. When contributing to an employee’s retirement plan, an employer can use tax benefits and other tax incentives and potentially save a significant amount of money.
The benefits a small business enjoys through offering retirement plans include:
- Increased savings as employer contributions are tax deductible
- Any assets that are a part of the retirement plan grow tax free
- Reduced costs for starting a plan due to tax credits
- Availability of the option of flexible plan
The tax breaks and other incentives are provided by the IRS to encourage employers to contribute to their employees’ retirement plans.
New businesses may reduce the costs of hiring new employees if they provide security to their employees through retirement options, while at the same time reducing their tax liability by using the tax benefits that come with it.
Setting up a Retirement Plan
When employers are looking to start a retirement plan, it is important to hire the services of a tax professional that understands retirement plans. The funds required for contributing to the plan must be available at present and in the future. The employer will need to operate the retirement plan and make timely contributions in order to continue to keep the participating employees covered. Both the employer and employees can enjoy the tax benefits of the retirement plan(s) while financially securing their future.
A tax professional can help in setting up, managing and closing a retirement plan. The tax benefits of having a retirement plan for the business and employees have made businesses financially stronger, with employees that are financially secure now and in the future.