Mine the market plunge to build retirement plan

NEW YORK -- Amid the turbulence of the plunging stock market, there's a great opportunity for small-business owners. If they set up retirement plans now, they'll position themselves and their employees for big gains when Wall Street finally recovers.

And it's still possible to set up a plan and get a break on 2007 taxes.

The savviest investors, especially those saving for a retirement that's years away, buy when the market is down.

"What's the best place for long-term growth? The stock market," said Bob Doyle, president of Doyle Wealth Management Inc. in

St. Petersburg, Fla. "It's down, but wouldn't you like to buy something cheaper as opposed to something more expensive?"

Doyle acknowledged that it's human nature to shun the stock market when it's in a slump, and he said many would-be investors think that because the stock market has fallen close to 20 percent in recent months, it's going to fall another 20 percent in the near future. They don't even want to consider investing.

But, Doyle noted, that while there have been bear markets since the end of World War II, "they all ended and they were all followed by resounding bull markets."

So, for small-business owners looking to provide their employees with a valuable benefit, and to give themselves an effective recruitment and retention tool, this is a good time to be thinking about creating a retirement plan.

Tend your future, too

Many small-business owners expect their companies to be enough of an investment, and don't think that retirement plans -- at least for themselves -- are a necessity. Financial pros say that's a mistake.

"You need to make sure that you have something in place that's going to take care of your needs in the future," said Catherine Gordon, a senior writer-analyst with Wolters Kluwer in Cocoa Beach, Fla. She noted that owners with no additional investments are financially vulnerable in the event their companies fail.

Small-business owners have a number of retirement plan options. If you're considering one, first learn about the types of plans, and consult with a tax professional and perhaps a benefits consultant to determine which one is best for your company.

One of the most popular plans, the Simplified Employee Pension, allows a company to deduct up to $45,000 for its contributions to an employee's account. (That amount may change for the 2008 tax year.) If you're thinking about starting a plan in the near future, the SEP plan carries a bonus -- you still can set it up and make a contribution for 2007, getting a tax deduction as long as you do this by the due date for your return for last year, April 15 for most people, but that includes extensions until

Oct. 15.

Fewer hassles

The SEP plan has the least amount of paperwork and reporting requirements, making it easy for a small company to administer.

Another plan with a minimum of paper is the Savings Incentive Match Plan for Employees. It provides for employers to match employee contributions, similar to the process in a 401(k) -- and it's possible for a SIMPLE to be a 401(k). It carries more restrictions than an SEP; for example, it only can be created by a company with 100 or fewer employees. But it has some advantages; contributions can be made by payroll deduction.

Other plans include more formal 401(k) profit sharing and defined benefit plans.

The IRS offers a free CD-ROM with information about retirement plans, including rules for setting them up. It's called the Individual Retirement Arrangement Resource Guide for Small Business Owners and Individuals CD-ROM, and you can order a copy online. Go to and scroll down the list to "SEP and SIMPLE IRA Retirement Plan Information." Or call 800-829-3676 and ask for Publication 4395.

IRS Publication 560, Retirement Plans for Small Business, also may help. You can find it at pub/irs-pdf/p560.pdf.

The Labor Department has information for small-business owners, too. At elaws/pwbaplan.htm, the department provides information on the plan types, and the responsibilities, such as annual paperwork requirements.