Sole proprietors, partnerships, limited liability companies, Sub S Corporations, and C Corporations that do not employ any common-law employees have several options for business retirement plans. The business owner's spouse (if employed and compensated by the business) may also participate in these plans.
Individual 401k
For businesses with no common-law employees, these business retirement plans allow owners to maximize their contributions. Employer contributions are tax deductible (subject to applicable limits) to the business, and salary deferrals can be made on a pre-tax basis (which are excluded from income for federal income tax purposes) or as Designated Roth Contributions.
SEP IRA
Simplified employee pension (SEP) plans allow business owners to set aside money in a retirement account for themselves (and spouse, if applicable) subject to applicable limits. There are no administration costs, paperwork is minimal, and all contributions are tax deductible to the business.
SIMPLE IRA
Since an owner-only business is less than 100 employees, a business owner can establish a SIMPLE IRA (including a spouse). A business owner (and spouse) is able to defer a portion of his/her salary as pre-tax contributions and the business makes a tax-deductible matching or non-elective contribution. There are no administration costs and minimal paperwork.
A 10% tax penalty may apply for withdrawals from tax-qualified products before age 59½.
Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.
Securities distributed by State Farm® VP Management Corp.
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AP2024/03/0349