To say that today’s jobs picture is one of the best we’ve seen in modern U.S. history is not an exaggeration.
As I write this column, the official unemployment rate is 3.6%. The last time the jobless rate was this low was in the late ‘60s. That was about a half century ago.
It’s hard to argue that the labor market is anything but “tight.” That’s an economist’s way of saying that it’s not too tough to find a job. Of course, the flip side is equally true for businesses searching to fill an opening.
In this tight labor market, keeping talented and productive employees is even more imperative. The investment made in employee training cannot be understated. To watch a talented employee walk out the door for the final time is one of the quickest ways to put a business in reverse.
Beyond competitive wages, one way to retain valuable employees is by providing attractive benefits. Among the lengthy list, near the top sits an employer sponsored retirement plan.
For the small business owners and self-employed among my readers, investment adviser Derek Dall’Olmo of Tremonte Financial Consultants will offer his expertise to the Money Series on December 4th where he’ll discuss in detail Simple IRAs, SEPs, and 401(k)s.
Simple IRAs are, naturally, simple to set up. They also relieve you of many intimidating employer responsibilities. Beyond making contributions of up to 3% of your payroll, each employee can add their own voluntary contributions to their account, up to $13,000 for this tax year. At age 50, they can add another $3,000. To keep it truly simple as the employer, you don’t have to create or monitor an investment menu for them and your employees get to manage their own Simple-IRA accounts.
SEP-IRAs can be viewed as a one trick pony. They are most often used by self-employed people, but that’s not always the case. As the employer, you get to choose the fixed percentage to contribute to each and every employee’s account. The maximum is quite high at about 25% of your payroll. Importantly, there are no voluntary employee contributions in a SEP-IRA plan. Every dollar comes from you, the employer.
The 401(k) is definitely more complex than other retirement plan types. It comes with added employer responsibilities and it is more expensive to create and manage. In exchange, however, 401(k)s offer greater flexibility in their design and allow for larger employee contributions. While they are typically used by more mature businesses, their single-employee version, called a Solo or Individual 401(k), is an especially attractive solution for high earners or super savers.
To help kickstart your business planning, please join us for the Money Series on Dec. 4th at 6:30 pm in the McGuire Room at the Traverse Area District Library. The non-profit Money Series provides open-access to financial education, for all. Register at MoneySeries.org or call (231) 668-6894.
