401K and Other Retirement Plans

At Old Dominion Investment & Retirement Advisors we build tailored retirement plans for our clients to match their specific goals and objectives.  Different types of retirement plans are available for different sized businesses, and we can help you determine which is best for your situation. 

 

401K

As members of Retirement Plans Advisors Group (RPAG), a national organization of independent advisors dedicated to excellence in 401K plan management, we have access to thousands of low-cost investment choices and nearly one hundred 401K platforms to help find the plan that is right for your business.  Below are the two most common types of 401K plans.

Traditional 401Ks

Traditional 401k plans are pretax savings accounts. Employee contributions go into the account before they are taxed, which in turn, makes an employee’s taxable income lower.  Upon retirement, a person will pay taxes on the amount that they withdraw from the account.  In a traditional 401k, a person is usually eligible to start receiving distributions at age 59 ½ without penalties.

Roth 401Ks

Roth 401k plans are after tax retirement savings accounts. This means contributions are taxed before they enter Roth 401K account.  Upon retirement, a person will receive tax-free withdrawals on their contributions and growth once they are 59 ½ AND they have held their account for five years.

 

Individual Retirement Accounts (IRAs)

Traditional IRAs

Individual retirement accounts (IRAs) hold a variety of investments to help an individual save toward retirement.  IRAs allow individuals to invest in different types of assets inside the account. Your IRA provider acts as the custodian of the account, and invests the funds based on your wishes.  Contributions to traditional IRAs are usually tax-deductible. Taxes on traditional IRA earnings are not paid until a person reaches retirement, and then withdrawals are taxed as income.  A person is required to take annual minimum distributions at the age of 72, and there is a 10% tax penalty for early withdrawals from traditional IRAs.

Roth IRAs

Roth IRAs are similar to Roth 401Ks in that contributions are taxed before they enter the account.  This means that earnings and withdrawals are tax-free.  Roth IRAs also allow tax-free withdrawals of earnings on contributions after a five -year holding period, under certain conditions.  Those conditions include reaching age 59 ½, being disabled, or using the funds for first-time homebuying expenses.

SEP IRAs

A Simplified Employee Pension (SEP) IRA is available to business owners (with 100 employees or less) and self-employed individuals. SEP IRAs provide tax benefits to employers when they make contributions to employee’s accounts. Employers can contribute up to 25% of employees’ annual salaries into their accounts (capped at $57,000 for 2020), however employees cannot contribute money to their own accounts.

SIMPLE IRAs

The SIMPLE in SIMPLE IRA stands for Savings Incentive Match Plan.  SIMPLE IRAs are available to small businesses that do not have any other retirement savings plan. Like a 401(k) plan, SIMPLE IRAs allow both employee and employer contributions, but with easier and less costly administration, as well as lower contribution limits. SIMPLE IRAs require employers to either contribute 2% of an employee's annual salary (even if the employee does not contribute) or to match employee contributions at 3%.  The annual max contribution for 2020 is $13,500 or $16,500, for those over 50.

Neither Voya Financial Advisors nor its representatives offer tax or legal advice.  Please consult with your tax and legal advisors regarding your individual situation.

 

Give us a call to start exploring which retirement plan is right for your business!