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Goering Center news

The top five reasons to start or change your business retirement plan

By Bill Schumacker

There are a variety of great advantages to setting up a retirement plan for your business. Maybe your tax bill is high and you’d like a way to reduce it. Maybe you want to be more competitive in attracting and retaining the best employees. Perhaps you and your employees aren’t saving enough for retirement and you need to put more substantial money away. It could be that the cost of your current plan is too high or you’re unhappy with how it’s being managed. Here are some of the most common reasons for starting or changing your plan.

Popular reasons to create a new plan

Reduce your taxable income

When your business is profitable, a retirement plan can be an excellent way to reduce your taxes. Your contributions can grow tax-free until you’re ready to retire, and, depending on the type of plan, employer contributions can potentially be considered a business expense. Different types of plans have varied contribution levels and limits, and our investment professionals can help you navigate the many choices so you can decide which one might be best for your business.

Your retirement savings (and your employees’) can get a much-needed boost

As an owner, you benefit from contributing more than what you could just by having an IRA (Individual Retirement Account). Your employees will have a reliable and convenient way to save for retirement, so you’re helping them invest in their futures, too.

You want to attract and keep great employees

Other businesses in your area might not offer a retirement plan. This is your chance to attract the best talent by offering a benefit others don’t or can’t. And if your competition has a retirement plan, adding one enhances your ability to be competitive.

You want an asset outside of your business

Do you believe your company will become your retirement money once you’re ready to sell it? A retirement plan gives you another way to create your nest egg without relying solely on the business’ value.

A variety of investment options are available

A retirement plan is an excellent way to diversify your investments to potentially spread out risk and heighten your returns. (Keep in mind, investments are not FDIC insured, not bank guaranteed and may lose value.)

If you already have a company retirement plan, your concerns and issues are a little different. Here are the most common reasons to consider changing plan managers:

Your plan investments aren’t doing the job

Maybe your current suite of investment options aren’t broad enough or aren’t getting the types of returns you were expecting. You want a plan manager who can offer investments that meet your goals.

It seems like your plan administrators aren’t talking to each other

That’s especially difficult if the brokers are in one location and the third-party administration is in another. Sometimes you’re treated as the intermediary between the two, and that’s not your job.

The cost of your current plan is too high

You never want something that is great for the company to be so costly that you question its worth. You need a plan manager that will act in your best interests, whose fees are transparent and fair and who understands the value of controlling expenses.

You can’t get answers to your questions or connect with the people who can help

You don’t want to chase down multiple phone numbers to address any questions or concerns or wade through layers of people to find the right person. If you can’t get the right person on the first call, it might be time to reconsider your plan manager.

You are the plan trustee and you aren’t comfortable with all of the liability

If something goes wrong, the government finds you in noncompliance or your employees sue the plan, it’s all on you. You might want someone on your side to help you navigate the rules and share in the liability.

Bill Schumacker is senior vice president and trust officer for Park National Bank. Reach Bill at 513-718-6053 or wschumacker@parknationalbank.com.

About the Goering Center for Family & Private Business
Established in 1989, the Goering Center serves more than 400 member companies, making it North America’s largest university-based educational non-profit center for family and private businesses. The Center’s mission is to nurture and educate family and private businesses to drive a vibrant economy. Affiliation with the Carl H. Lindner College of Business at the University of Cincinnati provides access to a vast resource of business programing and expertise. Goering Center members receive real-world insights that enlighten, strengthen and prolong family and private business success. For more information on the Center, participation and membership visit goering.uc.edu.