VIDEO TITLE: Five retirement plans for small businesses. EXPERT: Carol Ventura, Retirement Services Manager, H.D. Vest Financial

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1 WELLS FARGO BUSINESS INSIGHT SERIES VIDEO TITLE: Five retirement plans for small businesses MODERATOR: Rich Sloan, StartupNation EXPERT: Carol Ventura, Retirement Services Manager, H.D. Vest Financial Services VIDEO DESCRIPTION: Start early by building retirement assets and evaluating the various plans: individual 401(k), SEP IRA, SIMPLE IRA, Safe Harbor 401(k) and defined benefit plans. RECORDING DATE: November 11, 2008 [Music plays.] RICH SLOAN: Building assets, Carol. Let s dwell on this a little bit. What should our viewers consider for their retirement plans? CAROL VENTURA: Basically I want to emphasize two things that are crucial to establishing a solid foundation for your retirement. Number one, start early. We mentioned that before. And also number two, build assets beyond your business. A lot of times I hear the story of the small business owner who thinks that his retirement plan is

2 his business. When he gets ready to leave, he s selling the business and that is going to be his retirement plan. SLOAN: And are there specific plans you can walk us through? VENTURA: I want to go through five. What I ve done is I ve arranged them so that they are going from easy to more complex. The first one is the individual 401(k). With the individual 401(k), this is for a business that has only the owner, maybe a spouse, a couple of partners. They re looking for a way to maximize a retirement benefit and they re contributing only for themselves because they are the only people in the business. This plan might be called flying solo. You re all by yourself. So think of it that way. It s a salary deferral by the owners. It s also an employer contribution that s going in. The next one is a SEP IRA and this one is where the employer is putting contributions into the IRA accounts for themselves as well as any employees who are eligible. The third one is a Simple IRA and this one was modeled to, for a small business owner, an owner that has less than 100 employees that was geared towards giving the employer something that was like a 401(k). Everybody is familiar with a 401(k), but those rules are rather complex. And for the business owners, especially the small ones that have less than 100 employees the Simple IRA was trying to simplify the rules. So just like a 401(k), the Simple IRA has a

3 component where the employees are putting money in out of their own pay to supplement their retirement. And then in addition to that, the employer is obligated to make an employer contribution alongside of it. The fourth one is the Safe Harbor 401(k) and this plan is designed for an employer. Usually you re going to see the 401(k) plans come in play when an employer wants to attract and retain employees. This one is more complex. It s a Safe Harbor 401(k). What it s doing is it s taking away some of the complexity of a traditional 401(k) and allowing the owners to maximize their salary deferrals without having to do the complicated testing that you would see in a traditional 401(k). So again, this one is both employee-funded, employees are taking money out of their pay, as well as the employer making contributions in. SLOAN: And number five? VENTURA: Number five. The big one, the most complex plan of all is the Defined Benefit Plan. This plan is ideal for the business owner who didn t get started on the retirement plan early. They re looking at retiring in the next five years or maybe seven. So they ve put off their retirement savings and they need to put away a lot of money in a very short period of time. Now this plan, I mentioned, was the most complex. You have administration costs. It s hard to understand the plan. It s

4 hard to communicate it to employees, but it will benefit the person who is older, closer to retirement because they re able to put away more money. [Music plays.] Discover more ideas and solutions for your business at: For more information, talk to a Wells Fargo banker by calling: WELLS, ext. 130 [End of recording.] VIDEO LINK: stages/retirement-and-transition/five-retirement-plans-small- businesses

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