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.

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% 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% 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% 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% of salary, and 50 cents per dollar after that, capped at 4% of salary.

AOA members can receive a one-on-one consultation with a dedicated retirement program specialist through AOAExcel.