Author Topic: Retirement acct for Small Painting Company  (Read 965 times)

Stretch67

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Retirement acct for Small Painting Company
« on: April 16, 2019, 11:33:38 AM »
Hi All,

I own an industrial painting company with 10 people currently, including 3 who are owners. We intend to grow the business in the coming years, as us owners are all around 30 years old with lots of energy.

I'm wondering where is the best place to set up our retirement accounts. I've met with two local outfits, they're financial advisors/wealth managers. Of course they make a good argument for investing with them. For IRA's, they charge I think roughly 1% AUM yearly. For a company 401k, its .25% AUM yearly. One of them is a proponent of American Funds, and I don't remember the other. I asked about the front/back loads on American Funds, and they said that there aren't any on the 401k side, only for IRA's. Wasn't sure if I understood it correctly or if they're telling the truth. They do come highly recommended in the local community.

I also looked into Betterment; what do the stachians think of Betterment?

Reading The Simple Path to Wealth has me wanting to avoid them ("normal financial advisors"). But I can't do a 401k for the company by myself. I've done some searching, and found mentions of Employee Fiduciary and Guideline. Although nobody has really written a follow up to explain what they went with and how its working so far.

Looking for recommendations please and thank you!

SeattleCPA

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Re: Retirement acct for Small Painting Company
« Reply #1 on: April 16, 2019, 04:54:32 PM »
FWIW, we use Simple-IRAs at my CPA firm.

Employer doesn't pay that $2K annual fee to administrator. The match equals 3%. And the reality is, most employees don't want to save more than the lower Simple-IRA limits.

P.S. We use Vanguard's Simple-IRA plan and then their website for putting money into people's accounts.

Stretch67

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Re: Retirement acct for Small Painting Company
« Reply #2 on: April 17, 2019, 05:51:31 AM »
FWIW, we use Simple-IRAs at my CPA firm.

Employer doesn't pay that $2K annual fee to administrator. The match equals 3%. And the reality is, most employees don't want to save more than the lower Simple-IRA limits.

P.S. We use Vanguard's Simple-IRA plan and then their website for putting money into people's accounts.
Interesting. To me, a 3% savings with 3% match doesn't seem like enough...

Does the company do any profit sharing? We've given cash bonuses of 4-12k for 9 outta 10 years now. Figured we better start putting it towards retirement.

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walkwalkwalk

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Re: Retirement acct for Small Painting Company
« Reply #3 on: April 18, 2019, 08:50:05 AM »
FWIW, we use Simple-IRAs at my CPA firm.

Employer doesn't pay that $2K annual fee to administrator. The match equals 3%. And the reality is, most employees don't want to save more than the lower Simple-IRA limits.

P.S. We use Vanguard's Simple-IRA plan and then their website for putting money into people's accounts.
Interesting. To me, a 3% savings with 3% match doesn't seem like enough...

Does the company do any profit sharing? We've given cash bonuses of 4-12k for 9 outta 10 years now. Figured we better start putting it towards retirement.

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You can save more than 3%, but 3% is the minimum to get the match.

Stretch67

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Re: Retirement acct for Small Painting Company
« Reply #4 on: April 18, 2019, 08:54:37 AM »
Ten four.

But the comment about people not really wanting to save more than 3%.....

You'd think people who work at a CPA firm would know (how much to retire well) if anyone would.

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walkwalkwalk

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Re: Retirement acct for Small Painting Company
« Reply #5 on: April 18, 2019, 09:02:58 AM »
Ten four.

But the comment about people not really wanting to save more than 3%.....

You'd think people who work at a CPA firm would know (how much to retire well) if anyone would.

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I think that was referring to people in general and not the FIRE subset or people who generally save more.

Edit: Also didn't read it as suggesting anyone only save 3%.

SeattleCPA

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Re: Retirement acct for Small Painting Company
« Reply #6 on: April 19, 2019, 08:46:09 PM »
With a simple-IRA, an employee can save $13K... and general rule is employer can do a 3% of wages match. E.g., if employee makes $50K, employer can contribute up to $1500. (For employees aged 50 or older, the elective deferral limit is $16K.)

The employee total, then, is $13K or $16K plus that 3% match which might be $1500 in case of employee making $50K.

My comment, and I wasn't clear about this sorry, was meant to communicate that most employees won't want to save anywhere close to $13K or $16K of their wages. In fact, in a small firm, many employees very possibly won't even contribute enough to take the match. :-(

The employer issue is should you pay $3K a year or whatever to bump your personal retirement savings from $13K or $16K a year to some higher limit.

feelingroovy

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Re: Retirement acct for Small Painting Company
« Reply #7 on: April 22, 2019, 10:02:03 PM »
Just wanted to add that I have a small business as well with 5 employees. We also have a Simple IRA with Vanguard. It really is simple and there are no fees to the business. I have enough else to deal with.

I am the only one who maxes it out. Not everyone even contributes enough to get the match.

firescape

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Re: Retirement acct for Small Painting Company
« Reply #8 on: April 25, 2019, 07:58:42 PM »
I own a small business with 8-10 employees and have had a Vanguard Simple plan in the past, with 3% match. Not a bad plan, price is very low to maintain but we had very limited access to VG funds. We couldn't invest in VTSAX for example.
I wanted a larger match with more options so we switched to a Vanguard 401k plan. You can do 3-6% match (we do 6%) and put away more money each year. Plus we can invest in any Vanguard fund we want, and use profit sharing distributions to fund our account, getting it closer to the limit each year.
It does cost around $1000 a year and requires more work to administer. Ascensus is the name of the firm that administers Vanguard's 401k plan, and they handle all the compliance issues.
It does cost more, but I think in the long term it's a better deal for the owners and employees.

FuzzyRunner

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Re: Retirement acct for Small Painting Company
« Reply #9 on: May 09, 2019, 02:05:37 PM »
I've been looking to set up my companies 401k with Vanguard and using their SIMPLE IRA.

Is a good way to look at deciding between a normal 401k and the SIMPLE IRA, with regard to money coming out of my business, be to take the total amount I would be required to match with the SIMPLE vs the fees required to run the normal 401k?  So if I expect to have to match maybe $5k would it be better to just pay the 401k fees at $2k or am I missing something?  I do expect to have to take a pay "cut" to take my mandatory match so that the money coming out of the business is the same with or without the retirement plan.

I have two questions about the SIMPLE IRA:

If an employee makes $50k a year but only contributes say $500 a year, do I then match the $500 or am I supposed to contribute $1500 (given I set up the account for a 3% match) no matter the amount they contribute?

Also, are you pleased with the funds offered for the SIMPLE IRA?  I currently invest in VTSAX so from an poster above it looks like that isn't offered.