We have all heard how valuable it is to start planning for retirement early. When it comes to providing employee benefits, architectural firms sometimes view a retirement plan as a second-tier benefit to be added as the firm grows. Some may also have the misconception that they don’t have enough employees to start a plan or that the expense of adopting a plan and contributing for employees isn’t worth it. Such misconceptions often lead to procrastination and missed opportunity. The fact is less expensive and less time-consuming approaches to retirement planning do exist.
As an architect, you have retirement planning concerns that are unique and because of your skills, the time frame for retirement is flexible and may include a gradual transition. There is an appropriate retirement plan for every stage of your business and you can get started sooner than later—no matter how small a contribution you may make.
Most architectural firms’ retirement plans should be established for endurance and ease of use. A “bundled” service provider can save you time, money and effort. The “bundled” approach offers you a single source of retirement plan design and ongoing service—allowing you to run your business instead of running a retirement plan.
Pre-approved, tax-qualified retirement plans can be custom fit to suit your situation, needs and retirement goals. They work with you so that you can make the most out of your plan. Bundled service providers understand that a one-size-fits-all plan may be better suited for a larger business and that these types of plans do not fit everyone.
A bundled service provider can save you valuable time, effort and expense because you and your eligible employees will generally deal directly with a staff of trained and licensed account executives that administer plan record-keeping and paperwork.
When it comes to having the right retirement plan designed specifically for your firm, there are some beneficial options. These options may enable you to contribute higher amounts for yourself, while maintaining a plan you can afford and easily manage.
If You’re a One-Person Firm—Consider An Affordable Owners 401(k)
An Owners 401(k) combines the benefits of profit sharing and 401(k) plans without costly set-up charges. With an Owners 401(k), one-person practices may be able to defer more than they might be able to than with SEP-IRA, SIMPLE 401(k), profit-sharing plan, Keogh or other defined contribution plans. Rather than a fixed contribution limit, as is common with some other plans, the Owners 401(k) contribution limits are based on a percentage of income. Plus, by allowing for a profit-sharing contribution as well as a 401(k) salary deferral, contributions can be up to three times as much as what’s allowed under some other types of retirement plans.
If You Have an Established Firm with Younger Employees—Consider a New Comparability Plan
If you’re an owner with younger employees looking to maximize your retirement plan, you may be able to take advantage of age-weighted allocations and new comparability formulas that benefit plan participants approaching retirement. These plans, known as New Comparability or Cross-Tested plans, enable you to divide plan participants into two or more designated groups, and in many cases, the plan can make larger contributions for one group—those closest to retirement—than for another.
If You Have a SIMPLE IRA or SEP-IRA—Consider Upgrading to a Safe Harbor 401(k)
The Safe Harbor 401(k) is a plan that offers significant contribution flexibility with a salary deferral of as much as $17,500 for 2013 plus a $5,500 “catch up” contribution if you are 50 or older (all amounts subject to IRS cost of living adjustments), plus the ability to contribute to a profit-sharing plan. Owners can defer the maximum contribution for themselves, regardless of employee participation, making Safe Harbor 401(k) an attractive plan for highly compensated owners with employees and you avoid the annual testing that’s required in a Traditional 401(k).
If You Have Multiple Retirement Plans—Consider Consolidating Plans
If you manage multiple retirement plans such as an IRA, Rollover IRA, 401(k), Profit-Sharing and/or 403(b) accounts, you may want to consider consolidating retirement plans and assets. By consolidating your other plans into a single 401(k) plan, you may be able to simplify investment management, save time, reduce fees, stay diversified and be a more effective, informed investor. Plus, if you consolidate IRA assets into a 401(k) plan, you may have access to loan features and other benefits not available with an IRA.
Re-Evaluate Your Retirement Planning Today
Every year represents an opportunity to re-evaluate your retirement planning and goals. Having the right plan and service platform for your current situation can make a significant difference.
AXA Equitable’s Members Retirement Program has been available to AIA members since 1991 to help members plan for an independent retirement. The program is committed to keeping costs low while delivering comprehensive “bundled” service to help minimize the time needed to establish and manage a plan. There’s a plan for every architectural business scenario and it’s important to know it can be changed to meet your retirement plan needs now and in the future. To learn more about the Members Retirement Program, call 800-523-1125 or visit www.axa-equitable.com/mrp. You may request a customized plan proposal. All information and consultations are free of charge and available to AIA members at no obligation.