J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Comparison of Qualified Retirement Plans

The different choices of qualified retirement plans have been discussed at length. But how do you know which plan is best for you? There are several factors to consider:

• How much money do you have to set aside in a retirement plan? If your business is continually profitable you may want to commit to a type of plan that requires contributions without regard to profits. If your business is good in some years but bad in others, you may want to use a profit-sharing-type plan that does not require contributions in poor years.
• How much will it cost to cover employees? When there are few or no employees, then the choice of plan is largely a question of what will be the most beneficial to you. When a great number of employees will have to be covered, the cost may be too prohibitive to provide substantial retirement benefits. However, if your competitors offer plans to their employees, you may be forced to offer similar benefits as a means of attracting or retaining employees.
• How soon do you expect to retire? The closer you are to retirement, the more inclined you may be to use a defined benefit plan to sock away as much as possible.
• Also consider the costs of administration, the amount of entanglement with the IRS, and your financial sophistication and comfort level with more exotic arrangements.

Table 16.2 offers a comparison of the retirement plans.

TABLE 16.2 Comparison of Retirement Plans in 2012

Type of Plan	Maximum Contribution	Last ...