When it comes to determining the right path towards retirement, many Ohio workers often debate on whether a traditional or Roth IRA is right for them. They often discuss which option is better for tax breaks, withdrawals and distributions in the long run. With the constantly changing economy and rules towards both systems, it can be difficult to decide.

However, what many do not know is that there are more options available that are more designed for specific demographics. If you are a business owner, there are several programs available that can potentially benefit you more than the two most popular retirement plans. It is imperative that you know about these IRAs before making a final decision to see which is right for you.

The Simplified Employee Pension (SEP) IRA

If you are a business owner or receive some form of self-employment income, you can potentially set up an SEP. This plan offers you the same distribution, investment and rollover rules that you would find in a traditional IRA. However, as the name suggests, it offers a more straightforward process for employers and the self-employed.

Unlike the traditional and Roth plans, there is no requirement to make contributions every year for you or your fellow Ohio employees, making it very flexible for changing business conditions. It also offers lower administrative costs and higher contribution limits. The downsides are that all employees must be included on your plan with equal contributions and you will have to pay a 10 percent penalty if you withdraw before you are 59 and a half.

The Savings Incentive Match Plan for Employees (SIMPLE) IRA

SIMPLE IRAs are specifically for companies that have 100 or fewer employees that earn at least $5,000 a year. The contributions come more from the employees rather than the employer. It is easy to set up as banks have different prototype plans available. This includes implementing an automatic payroll deduction towards investment in a retirement account. You can choose to have employees having matching contribution of 3 percent of the total pay or 2 percent of each employee’s compensation.

However, you will have to update the planning if you grow beyond 100 workers at some point. Your employees might not be happy that the payroll deduction is mandatory. Make sure you have a good idea about your business’ future and be upfront about this in the application documentations.

The Solo 401(k) plan

While the previous two are helpful for both small businesses and the self-employed, this one is especially designed for the latter. This offers a maximum of two participants, the second of which can be your spouse or business partner. As you do not have to worry about other employees, this plan offers you the chance to set aside more money than other plans while offering flexible tax-deductible contributions.

But since this is your own plan, it requires far more maintenance than other options. The application process is strict and requires an expensive set up fee, but it is worth considering if you are confident that your work is sufficient.

How do you choose?

IRA programs offer different pros and cons that are dependent on your type of employment. Research what your employer has to offer and see which plan will ultimately match your immediate and long-term needs. An attorney may be able to help you determine which program would be more beneficial for your retirement and estate planning.

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