“I Run A Small Company. What Are My Retirement Options?”
One of the questions that I often get from clients who are either doing their estate plan or incorporating their business into an LLC or Corporation is “what do I do about retirement?” This is not really a legal question, but is an important component of planning. Many small businesses cannot afford to commit to a large-scale pension program, but need to do some planning and commit a limited about of assets for this.
Although this is NOT investment advice (you should seek advice from a financial planning professional for this) one of the best ideas to explore is having both a regular IRA and a ROTH IRA. This allows you to decide each year (up to certain limits) how much you want to put in, and whether you want the deposits to be tax deductible now, and taxable up receipt of the funds on retirement, or paid on taxed income now with no taxes when you pull the money out. This allows you the maximum flexibility each year to decide how much money to put it and what tax effect you want it to have.
401K’s work similarly and can have both standard IRA tax consequences and ROTH portions, but they do require all employees to have access to matching funds from the employer. They are very good when you want to put in for than can be put into a IRA during a given year.
Again, it is VERY important that you talk to an investment advisor about these issues, but these are the basic tools to use if you don’t want to look into a complete pension service. We are attorneys, and not financial planners, but we get asked these questions regularly and believe it is important for you to first educate yourself, then seek professional help.
Here are some good articles to read if you would like to educate yourself further on the topic:
http://www.foundationwealthmngt.com/learning_center/research/
Scroll down to the lower left and select articles on Traditional IRA, Roth IRA, or 401K for more info.
DISCLAIMER: All legal principles quoted are valid as of the date of writing in the State of California. However, you should NEVER base your actions on a legal article, blog, or internet story, as facts in real life are complicated. You should have your case evaluated by an attorney experienced in the area of law needed for your case. In addition, there are often exceptions and potential changes to results that occur due to facts that you may think are trivial or unimportant. This article should not be taken in any way as legal advice on your specific legal matter.