Business Retirement Guide

The general purpose of all retirement plans is to provide financial security following an individuals work career. With the right retirement plan, your business has a powerful incentive with which to attract and retain qualified employees.

This Guide provides an overview of the most commonly used business retirement plans. You should seek professional advice from your financial institution, an employee benefit advisor and the Internal Revenue Service prior to starting or making changes in your existing plan.

Types of Plans

There are basically two types of retirement plans offered in the private-sector: Defined Benefit and Defined Contribution Plans.

Defined Benefit Plans pay either a lump sum or a guaranteed monthly benefit upon retirement. The amount of the payout is typically based upon a set formula, such as the number of years worked for the employer times a percentage of your highest earnings.

Defined Contribution Plans plans do not guarantee a specific amount upon retirement. Instead, the amount depends upon how long you participated in the plan, how much is invested and how well your investments have grown over the years. One of the most popular types of defined contribution plans are 401(k) plans.

In many defined contribution plans the employee is offered a choice of investment options, and they must decide where to invest the contributions.

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