Types of Retirement Plans
A wide array of business retirement plans are available that benefit you at tax time. While the plans vary subtly in the tax benefits they provide, what we’re generally looking at is some combination of tax-deductible contributions, tax-deferred growth, and (in the case of Roth contributions), potential tax-free withdrawals. In order to help you set up your plan, there are tax credits that cover plan startup costs.
There are two broad categories that retirement plans fall into, the defined benefit plan—think pensions—and the defined contribution plan—like a 401(k). The plans discussed here are defined contribution plans, the most common types of plans in the small business market.
There are two main types of defined contribution plans: qualified plans, in which the company sponsors the plan, and IRA-based plans, which the business sets up but the employee or owner contributes to individually.