Pension Plans For Small Business

It literally takes only minutes to get one started--usually with no charge--with a bank, brokerage firm or insurance company.No annual government reports are required, and ongoing administrative expenses are nil.There are a number of retirement plan options for small business owners.

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The bottom line is SEPs are just as easy as deductible IRAs, but they allow much bigger contributions.

Keogh Plans Keogh plans are the self-employed equivalent of corporate retirement programs.

Once that's done, actual contributions can be deferred until the extended due date for that year's return.

Annual contributions to Keogh profit-sharing plans are based on a percentage of self-employment income or compensation and subject to a $42,000 ceiling.

A plan document must be drafted in Year One (this may cost a couple hundred bucks), and the IRS demands an annual report (you can probably do this yourself).

Keogh defined benefit pension plans are designed to deliver a targeted annual retirement benefit, which can be as high as 0,000.There's more to being your own boss than not having to answer to anybody: You can also set up your own tax-advantaged retirement program--and probably put aside more each year than you could working for somebody else.Here are some details on the best self-employed retirement plan options out there based on the 2005 tax rules: SEPs--Simple and Good Simplified employee pensions--referred to as SEPs or SEP-IRAs--are generic retirement plans that allow you to contribute and deduct up to 20 percent of self-employment income (25 percent of salary if you're an employee of your own corporation).But in the true American tradition of greed you still want more, more, more retirement tax breaks. For 2005, contributions up to ,000 are allowed (,000 for couples), subject to phaseout between adjusted gross income of ,000 and 0,000 for singles (0,000 and 0,000 for joint filers).Fortunately, the phaseouts are high enough to leave most people untouched.(This figure rises in 2006 and beyond.) On top of that, you can contribute and deduct an additional amount of up to 25 percent of your compensation income, or 20 percent of your self-employment income.Roth IRAs--Retirement Plan Dessert OK, you've now decided to set up a SEP, Solo 401(k) or Keogh plan. Contributions are nondeductible, but earnings build up tax-free and you can eventually take out all your money--including earnings--without owing Uncle Sam a dime.The same relatively generous thresholds apply even if you have a SEP, 401(k)or Keogh plan (and even if your spouse is covered by a retirement plan through work of self-employment).So you can contribute the max to your SEP, 401(k) or Keogh and then pop an additional ,000 (or ,000) into a Roth IRA to boot.If your business has employees, a SEP, Solo 401(k) or Keogh generally must cover them as well--meaning you'll probably have to make contributions that don't just benefit yourself.All employee SEP contributions are immediately 100 percent vested.