Retirement Savings Plans to Consider for 2023

 
Submitted by Matthew Paulson, President/Advisor at Voyageur Capital Advisors

While 2022 was a not-so-friendly reminder that the stock market also goes down, the long-term wealth creation potential of investing remains intact. 

From 1980 through 2021, the S&P 500 index gained an average of 9.4% per year.  

If you invested $5,000/yr and it grew at 9.4%, you’d end up with over $730,000 after 30 years. That’s $150,000 of contributions and over $580,000 of growth. In the long-run, cash is not king!

Yet, too many miss out on this potential. Sometimes it’s for personal reasons, but often, it’s because employers don’t offer a retirement plan to their employees, or because the retirement plan that is in place is not a good fit, or not well understood.

Below are three popular retirement savings plans that every employer should consider. No one plan is superior, it’s about finding the right fit for your business.

SIMPLE IRA
Great for employers with up to 100 employees who want to provide some sort of savings plan and contribution for their employees, but minimize complexity and expenses. Employees can contribute up to $15,500 ($19,000 if over 50) in 2023 and employers have to either offer a matching contribution of 3%, or a non-elective contribution of 2%. Only pre-tax contributions are allowed.

SEP-IRA
Allows for much higher contribution limits as compared to a SIMPLE IRA, but, generally speaking, requires the contribution to be the same percentage of compensation for every employee. Great for businesses with no employees. Only pre-tax contributions are allowed and only the employer contributes to a SEP-IRA; employee contributions are not allowed.

401(k)
401(k) plans are very popular options for employers who want high contribution limits and the ability to customize the plan design. For example, unlike the SIMPLE IRA or SEP-IRA, a 401(k) can be allow Roth contributions, loans, and a more customized employer contribution structure.

As it’s been said, the best time to plant a tree was 20 years ago, the next best time is today. If you’ve been putting off looking into a retirement plan, or haven’t reviewed your current plan in years, now is the time.

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QUESTIONS? Our goal is to be your financial strategist, navigator and teacher. While you are busy living life and making it on work on a daily basis, we stand back and look at the big picture.  This means not only recommending adjustments or strategies to implement now, but also watching the road ahead and identifying potential opportunities to take advantage of, or pitfalls to avoid. 

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