Know Your Options

Know Your Options

Options when it comes to overcoming financial challenges are vast, and there is no one size fits all answer. Lets look at the top two types of plans most people are familiar with.


The IRA is probably the simplest retirement arrangement that a business can have. No plan document needs to be adopted under this arrangement.

  • The employer has no filing requirements.
  • Only employees make the contributions.
  • Any size business can provide this.

The employer’s responsibility is simply to transmit the employee’s authorized deduction to the financial institution. In general, if this arrangement is offered to any employee then it should be offered to all employees.

Pros and Cons:

  • Easy to set up and operate.
  • Little administrative cost or requirements.
  • Employers may receive little credit for this service from employees.
  • No deduction for the business.
  • Employees may or may not be able to deduct their contributions.

Is it the right option for you? What if the market does not perform well? What happens when retirement age is reached and it hasn’t grown enough? Here is another option.

401 K Plan 

If you establish a 401(k) plan, you will:

  • Can have other retirement plans.
  • Can be a business of any size.
  • Need to annually file a Form 5500.

You can make a 401(k) plan as simple or as complex as you want to.

Pros and Cons:

  • Greater flexibility in contributions.
  • Employees may contribute more to this plan than under IRA plans.
  • Good plan if cash flow is an issue.
  • Optional participant loans and hardship withdrawals add flexibility for employees.
  • Administrative costs may be higher than under more basic arrangements.
  • Need to test that benefits do not discriminate in favor of the highly compensated employees. This testing can be complicated.
  • Additional withdrawal and loan flexibility adds administrative burden for the employer.

You have seen these two plans before right? Your current employer has probably given these options to you. Are they the right option for you? Talk to an adviser today to see if there are other options available to you!

Got Questions? Talk to a Financial Advisor Today