Retirement Benefits For Small Businesses

902 WordsJun 16, 20154 Pages
Retirement is a major life event. Many people are living in retirement well beyond 20 years. For this reason, planning for retirement is vital. Unfortunately few Americans are saving adequately for their retirement. Reports reveal that a startling 68% of working-aged people, age 25-64, do not participate in an employer-sponsored plan. One reason for this is because a large number of Americans work for small businesses that do not provide retirement benefits. Small businesses are not required to provide retirement benefits to their employees. Owners of small businesses may feel overwhelmed with the responsibility of choosing a retirement plan that will be appropriate for the company and their employees. There are two main types of retirement plans: the “defined benefits plan” and the “defined contribution plan”. Knowing the options for small business retirement plans and understanding the difference between them will help to make the decision making process easier. Details Defined Benefits Plan The Defined Benefits Plan, also known as the “traditional pension” or “pension plan”, identifies the specific benefit that will be payable to the employee at retirement. Certain factors such as the number of years an employee works for the employer and the employee’s salary are factored into a formula for this basic retirement benefit. An employee generally receives a set monthly amount upon retirement. This monthly income is guaranteed for the duration of the retiree’s life
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