Retirement Plans

Advantages

• Perfect plan for an employer with fewer than 100 employees
• Very easy to set up
• Low fees
• Simple ongoing maintenance
• Employee contributions are tax-deductible
  
• Employer contributions are deductible business expenses
  
• No IRS reporting requirements

Disadvantages

• Employer matches a certain percentage of the contributions of the employees
  
• Large penalty for early withdrawals in the first two years - up to 25%
• Cannot roll contributions to other retirement plans in the first two years
• Employees cannot take loans against their funds (could be seen as an advantage)

Advantages

• Great fit for businesses and self-employed people
  
• No limit on the number of employees you must have to participate
• Very simple to set up
• Lower start-up costs than other retirement plans
• No IRS annual filing requirement
• Employer contributions are deductible business expenses
• Can contribute up to 25% of an employee's pay
• Employees are 100% vested immediately
• Employer contributions are not included in the employee's gross compensation
• Catch up contributions for those over 50 are allowed

Disadvantages

• Employers are the only ones that con contribute to the plan
  
• Employees are not eligible until they have worked at least three of the last five years
• Loans are not available (could be seen as an advantage)

Advantages

• Provides more options; employee contributions can be pre-tax or post-tax
  
• Employee pre-tax contributions are tax deductible
• All employer contributions are deductible business expenses
• Employees can choose how much they contribute
• Employers may provide a matching contribution
• High contribution limits
• Employee contributions are taken automatically as a payroll deduction
• Employee contributions will have no bearing on the amount of money you receive from Social Security
• Your funds are protected against bankruptcy
• Employee may borrow against the money invested in the 401k
• Can be designed to fit the needs of the employer

Disadvantages

• Failing to repay loans creates high penalties
• Employees may not be able to contribute as much as they'd like
• Employers may decide to provide no match to invested funds
• Are more costly to set up and administer than SIMPLE IRAs and SEPs
  
• Requires annual IRS reporting
• Employers are considered fiduciaries of the plan