MoneyFINDING IT HARD to hire employees for your small business?

Maybe the problem is your retirement plan. If it stinks, or you don't have one at all, savvy employees are unlikely to want to work for you.

So, where do you start? Here is a rundown of your retirement plan options. The best plan will vary depending upon your needs.

Simplified Employee Pension Plan (SEP IRA)

If you have just a handful of employees and are looking for a plan that is truly low cost and low maintenance, then consider a SEP IRA. The plan is funded with tax-deductible employer contributions, and you must cover all eligible employees. Employee contributions are not allowed.

With a SEP there is no "plan document," and you don't need to file annual reports with the IRS. Contributions can vary from year to year. So if you hit a lean spell, you aren't locked in.

Savings Incentive Match Plan for Employees (SIMPLE IRA)

SIMPLE IRAs (just introduced in 1997) are good for your employees. They allow employee contributions. And, they mandate an employer match. Trouble is, a SIMPLE IRA won't let you sock away as much for yourself. Annual contributions are limited to $6,000 plus up to 3% of your salary.

If you have a business with less than 10 people, then a SIMPLE IRA is a great way to get started. Whatever you do, don't get the SIMPLE IRA confused with its similar but flawed cousin, the SIMPLE 401(k). This retirement option is like a traditional 401(k) except it typically has higher fees and less flexibility.

Home | About Kensington Financial | Services | Information | Glossary | Contact Us |