401k options for small company
401k options for small company
While having a conversation with a friend last night who is an employee of a 2 man law firm, I was struck by the fact that he mentioned he's only saving in an IRA as opposed to any sort of 401k (company, self directed, etc). Due to the contributory limits of an IRA, he's likely going to find himself working until he's dead before he'd have enough squared away in his retirement account to seriously consider actually backing away from work.
Can someone please advise what 401k (or other) option might be his best choice for being able to save much closed to the 53k limit? I'm not sure if the options would be contingent of the type of business agreement (partnership, etc) or of there are any considerations in that regard, so, any information would be useful to pass along to him.
TIA.
Can someone please advise what 401k (or other) option might be his best choice for being able to save much closed to the 53k limit? I'm not sure if the options would be contingent of the type of business agreement (partnership, etc) or of there are any considerations in that regard, so, any information would be useful to pass along to him.
TIA.
- Smorgasbord
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Re: 401k options for small company
Is there a reason he can't save for retirement in a taxable account? I worked in a 3 man law firm for several years that did not provide a 401k, so I saved for retirement using tax-efficient investments in my taxable account while sticking the inefficient investments in a Roth IRA.katzmandu wrote: ↑Thu Oct 19, 2017 7:45 am While having a conversation with a friend last night who is an employee of a 2 man law firm, I was struck by the fact that he mentioned he's only saving in an IRA as opposed to any sort of 401k (company, self directed, etc). Due to the contributory limits of an IRA, he's likely going to find himself working until he's dead before he'd have enough squared away in his retirement account to seriously consider actually backing away from work.
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Re: 401k options for small company
Yeah, that sentence is an odd sentiment. Your money doesn't have to be in a tax-advantaged retirement account to be used for retirement.
Re: 401k options for small company
You say he's an "employee" of a 2-man law firm. Is he one of the 2 lawyers? Also, is the 2-man law firm really a "firm," or is it two solo practitioners sharing space? Space (and sometimes staff) sharing happens a lot with lawyers. The answers to these questions might make a difference as to what his options are. A solo 401k could, for example, be an option for him and his spouse if he's one of the lawyers and the lawyers are just sharing space.
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Re: 401k options for small company
A one-participant 401k can be used for any owner-only business. This can be a sole proprietorship, partnership or S-Corp.
Re: 401k options for small company
Lots of options for a 401k - EF, Vanguard are best.
Re: 401k options for small company
Father son team where they are both lawyers and employees, not just separate and sharing space.Rupert wrote: ↑Thu Oct 19, 2017 10:09 am You say he's an "employee" of a 2-man law firm. Is he one of the 2 lawyers? Also, is the 2-man law firm really a "firm," or is it two solo practitioners sharing space? Space (and sometimes staff) sharing happens a lot with lawyers. The answers to these questions might make a difference as to what his options are. A solo 401k could, for example, be an option for him and his spouse if he's one of the lawyers and the lawyers are just sharing space.
Re: 401k options for small company
If they have other employees, e.g., legal assistants, office manager, paralegals, runners, then SEP IRA and SIMPLE IRA are options. If they have more than 10 employees or so (which is very unlikely in a 2-lawyer firm), a small business 401k with an outfit such as Employee Fiduciary would be an option. If no employees, i.e., if the only two people working at the firm are the two lawyer-owners, a self-employed 401k would be my recommendation. (I bet they at least share a secretary/assistant, which would eliminate the self-employed 401k as an option for the firm).katzmandu wrote: ↑Fri Oct 20, 2017 6:51 amFather son team where they are both lawyers and employees, not just separate and sharing space.Rupert wrote: ↑Thu Oct 19, 2017 10:09 am You say he's an "employee" of a 2-man law firm. Is he one of the 2 lawyers? Also, is the 2-man law firm really a "firm," or is it two solo practitioners sharing space? Space (and sometimes staff) sharing happens a lot with lawyers. The answers to these questions might make a difference as to what his options are. A solo 401k could, for example, be an option for him and his spouse if he's one of the lawyers and the lawyers are just sharing space.
Re: 401k options for small company
We use a SIMPLE IRA and are very satisfied. It was much cheaper and simpler to set up and maintain than a 401k would have been for our dozen-or-so-staff small business.
Contribution limits are a bit lower than a 401k, but much higher than an individual IRA. (12,500 employee contribution max for under 50, 15,500 for 50 & up. Employer match up to 3% of salary will bump that up a good bit for the highly compensated employees/attorneys.)
Very low fees, very little hassle.
Set up was smooth and easy via Vanguard. They're lawyers, so they should be able to handle it.
Contribution limits are a bit lower than a 401k, but much higher than an individual IRA. (12,500 employee contribution max for under 50, 15,500 for 50 & up. Employer match up to 3% of salary will bump that up a good bit for the highly compensated employees/attorneys.)
Very low fees, very little hassle.
Set up was smooth and easy via Vanguard. They're lawyers, so they should be able to handle it.