Retirement benefits are attractive to employees because they allow them to save for their future in a pain-free way and enjoy some tax advantages while they're at it. These plans are probably going to enjoy greater popularity with highly compensated employees. More importantly, however, offering a retirement plan allows you to take advantage of the plan yourself.

Before you decide to create a retirement plan, make sure you:

• Understand the pros and cons of having a retirement plan.
• Know the major characteristics of the various types of plans.
• Determine your goals for having a plan.

If you do decide that you want to offer a retirement plan, you are definitely going to need some professional advice and guidance. Pension rules are complex, and the tax aspects of retirement plans can also be confusing.

But before you call your accountant and attorney, check out our discussions of some of the appropriate plan options for small business so you can make some informed choices and decisions before you contact them.

After you've assessed your needs and goals, some plans you can choose from, as a small business, are:

• profit-sharing plans
• 401(k) plans
• simplified employee pensions (known as SEPs)
• SIMPLE plans
• target benefit plans
• Keogh plans (these plans are for self-employed people in sole proprietorships, limited liability companies, or partnerships — not for businesses that are incorporated)

 

According to a CCH/Gallup survey, only 16 percent of the 1,000 small business owners surveyed offered a pension plan to employees. Eighteen percent offered a profit-sharing plan.