Corporate retirement plans are benefit packages set up for employees. Wealth management companies create and handle these types of accounts. There are many ways to structure them, and each one offers a different monetary reward to the employee.
Profit-Sharing
A company can share its earnings with the employees, and that can be distributed quarterly or yearly. This system means the workers are more actively involved in the company’s success because they have more than just a paycheck coming to them. The more profit the organization earns, the greater the profit-sharing cut the employee can get. The executives establish the amount.
401(k)
401(k)s are retirement vehicles that financial firms set up and manage for small and large corporations. The human resource or payroll department takes a percentage or set amount from the worker’s paycheck and deposits it into the 401(k). The funds are taken out before taxes if the money goes into a traditional 401(k). If the contribution is heading to a Roth, the payroll department takes the taxes out first.
SIMPLE IRA
SIMPLE IRA stands for a savings incentive match plan for employees’ individual retirement accounts. It is a wordy phrase but a powerful tool in the world of corporate retirement plans. It allows businesses with less than 100 workers to establish and contribute to the future of their employees. Sole proprietors can also develop these types of accounts for themselves. New employees can move money from their 401(k) and a traditional IRA into these, but there is a mandatory waiting period to roll a SIMPLE IRA into a traditional IRA.
