ARTICLE
Tax Preparation

Retirement Planning Tips for Businesses to Share with Employees

Written by Analytix Editorial Team | March 29, 2023

Managing finances is crucial, especially when planning for retirement. For business owners, it is critical to ensure they always adhere to legal requirements, especially if they have in-house staff. Employing staff requires businesses to adhere to financial regulations such as salaries and benefits. Businesses also typically need to ensure they are legally compliant with payroll regulations, including benefits such as retirement plans.

We have put together some tips that businesses can share with their employees and encourage them to include retirement planning in their long-term goals.

 

Early Bird Planning

Play your smart cards from the start. Reducing taxable income is no big deal in today’s life. Employees can start putting funds in different accounts that allow for the minimizing of tax obligations. This includes Roth IRA, Roth 401(k), traditional 401(k), or IRA for pre-tax contributions. Contribute equally to these accounts and follow the minimum funding requirement to begin proper planning.

  • 401(k): Opt for this plan to start retirement savings and investments. This is typically offered by employers and deducted directly from the employee’s paycheck. The employee can choose which funds to invest in to receive the best return or to receive a tax break on the money contributed.
  • Roth 401(k): Roth 401(k) is an employer-sponsored retirement savings account. Withdrawals in retirement are tax-free. While employees still pay taxes on the contributions, withdrawals that you take after age 59 ½ are tax-free, although they usually come with some stipulations by the investing company.
  • 403(b): This pension plan is available for public education organizations, non-profit employers, cooperative hospital service organizations, and self-employed individuals. The advantages of this include tax breaks, high contribution limits, and shorter vesting schedules.
  • IRA: While a 401K is a type of employer retirement account, an IRA is an individual retirement account. Under this plan, employees don’t have to pay any taxes until they make withdrawals. Consider this example: if you deposit funds during a high tax year and wait to make a withdrawal until taxes are lower, you are saving yourself from having to pay those higher taxes on all that money you deposited.
  • Roth IRA: The amount debited to this account is already taxed. You don’t have to pay any extra charges or taxes when withdrawing. This means that you always pay the current tax rate each time you deposit funds.
  • Catch-up contributions: People aged 50 or older can contribute to this pension plan. This plan is offered by the IRS and is intended to help people put more money toward their retirement savings.
  • Saver’s credit: Low- and moderate-income workers who save for retirement in a 401(k) plan or individual retirement account could qualify for the saver’s credit, which is a credit of up to $1000 as an individual and up to $2000 if you are married and file jointly. While a tax deduction just reduces the amount of your income that is subject to taxes, a tax credit reduces your actual tax bill dollar-for-dollar, so this one is a great option if you qualify.

A few tax tips to adhere to if you wish to save money:

  • Avoid the early withdrawal penalty
  • Follow minimum distributions
  • Always try to contribute the maximum that your employer matches
  • Delay 401(k) withdrawals
  • The Federal government’s Thrift Savings Plan

Talk to one of our financial experts to learn more about your options and to start planning early on. Withdrawal of funds from a retirement account or any other policy is subject to taxes. For example, withdrawing your retirement funds early can incur losses and penalties. Your finance expert can guide you through this, so be sure to take your time to do all the necessary research.

Next Steps

Written by

Analytix Editorial Team
Analytix Editorial Team

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