How to fund a retirement program for your practice

How to fund a retirement program for your practice

Excerpted from page 40 of the September 2016 edition of AOA Focus.

Starting a retirement plan for your optometric practice might not seem like a high priority when compared to seeing patients and owning a business, but a practice retirement program can help you keep valuable employees, as well as save money for your own retirement and lower your taxes, experts say.

The big advantage for the employer is a tax deduction for his or her contributions, and a tax deduction for contributing on behalf of their employees.

Peter C. Polovsky, a senior retirement program specialist at AXA Equitable—an AOAExcel® endorsed business partner—has worked with doctors of optometry for nearly two decades.

"The big advantage is the employer gets a tax deduction for his or her contributions, and a tax deduction for contributing on behalf of the employees," he says.

Here are Polovsky's tips on funding a retirement program for your practice:

Choose your plan
Gather your staff information, such as ages and income, and set up a meeting with a retirement program specialist. In Polovsky's experience, the most popular plan among doctors of optometry is the Safe Harbor 401k. It allows up to $18,000 savings per year ($24,000 for ages 50 and over), plus up to an additional 4 percent in matching contributions.

Set your limit
Determine the maximums you can contribute into a retirement plan, if that's your goal. "If a doctor has that objective in mind," Polovsky says, "I can define some of the options in terms of how he or she wants to treat his or her employees."

Define your contributions
As a rule of thumb, employers want 70 to 80 percent of contributions they make for their practice's plan allocated to them. Many employers provide a matching contribution to encourage employees to fund their own account.

Decide on matching
Employers often have the choice of matching employees' retirement contributions or contributing 3 percent across the board. Most opt for matching because they want to contribute to people for whom retirement is important. The most popular formula is a dollar-for-dollar match, up to 3 percent of salary, and 50 cents per dollar after that, capped at 4 percent of salary.

AOA members can receive a one-on-one consultation with a dedicated retirement program specialist through AOAExcel. Click here for more information.

September 14, 2016

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