What Is Qualified Retirement Planning And Its Advantages For Your Business?

Posted on: 12 January 2022


A qualified retirement plan is any of several types of individual retirement plans that allow employees to contribute pre-tax basis for retirement purposes. Investing in a qualified retirement plan can be advantageous because the money invested has already been subject to income tax on the way into the account. These plans are also considered "tax-deferred," meaning that any withdrawals are taxed at the participant's ordinary income tax rate rather than the higher long-term capital gains rates. Several qualified retirement plans exist, including 401(k)s, SEP IRAs, SIMPLE IRAs, and IRAs. What advantages does retirement planning for a business offer?

1. Tax-deductible Employer Contributions 

Qualified retirement planning for businesses is a good way to reduce short-term and long-term costs because contributions to retirement plans can be tax-deductible. You can use the savings to grow the business in ways that wouldn't otherwise be possible. Also, employees who contribute to a qualified retirement plan will have more money available in the future because they won't be paying taxes on their contributions. 

2. Flexible Investment Options   

Business owners can offer their employees a wide range of investment options, including stocks, bonds, real estate, and other investment opportunities. Employers can help their employees make better decisions by helping them understand the risks of each type of investment.

3. Tax-Deferred Growth   

Investing in qualified retirement planning, such as an IRA or 401k is a sound investment strategy. The money invested in these plans grows without being subject to taxes each year and is not taxed when withdrawn during retirement. This gives a huge boost to ‌ net worth, which means your employees can retire a lot wealthier than if they had never invested in a retirement plan.

4. Attract and Retain Better Employees

Retirement planning for businesses demonstrates your company is committed to its long-term success. Retaining good employees is important for any business, but it's especially important in industries where ‌employee turnover rates are high. Showing concern for your employees' well-being gives them one more reason to stay with your company. It also gives them morale because success for the business translates into their success. 

5. Reduce Costs    

Retirement plan costs are very low compared to other types of benefits, such as health insurance or life insurance. The money you spend on a qualified retirement plan can go a long way towards helping your employees prepare for their futures.

Are you concerned about your employees' financial security in retirement? Talk to a financial planner about retirement planning to secure their golden years.