Retirement plans are an excellent way for business owners to reduce taxes while providing employees (and themselves) with tax-deferred investment portfolios. The choice of retirement plan depends on what you hope to accomplish, keeping in mind all the latest trends to remain competitive in the workplace.

As you are evaluating retirement plans, ask yourself, "What is it that I am trying to accomplish by establishing a retirement plan for the company?" The following is a list of retirement vehicles that may be best-suited for your particular goals:

• Easy administration and low costs - A SEP-IRA can't be beat in this situation. With no start-up costs or annual tax returns to file, the simple calculations in this plan (generally speaking, 25 percent of income can be contributed) make it easy to implement. A SIMPLE IRA may also be appropriate in this situation, allowing for both employer and employee contributions. Be wary, however, as SEP-IRAs mandate immediate vesting and identical contribution percentages for you and your employees
   
• Long vesting schedules - If you are looking to motivate your employees, a profit sharing plan (PSP) with a long vesting schedule would make sense. Current laws allow vesting schedules to stretch from three to six years, so if structured properly a PSP can be a great motivator for your best people, by compelling them to remain with one company in order to preserve their portion of the profits.
   
• Taking care of your employees - A 401(k) allows employees (and owners) to contribute up to $15,000 ($20,000 if over age 50) on a tax-deferred basis annually. If you intend to contribute to this plan as an owner, a "Safe Harbor" match will likely be required, meaning your employees will receive a match of their contributions up to 3 percent of income (this match is vested immediately). Still, if you aim to max out your own contributions, a Safe Harbor 401(k) could meet the twin goals of taking care of your retirement savings and your employees'.
  
  Another option is the Roth 401(k) plan. Like Roth IRAs, contributions to these plans are not made on a pre-tax basis, yet retirement withdrawals from the plan are totally tax-free. Savvy employers have begun putting these plans in place, and the number of Roth 401(k) plans will surely grow in the coming years.
   
• Reward yourself - As the business owner, the IRS only allows so much to be contributed on your behalf before you must make contributions for your employees. The aforementioned SEP-IRA could allow you to disqualify non-owners for up to three years. If you are over age 50 and have strong cash flow, a Defined Benefit Plan (DBP) cannot be equaled in terms of annual contributions (which could easily exceed $50,000). In a company greater than ten employees, the Safe Harbor 401(k) may be your best bet.
  
  More and more employers are giving their employees choices when it comes to the investments in their retirement plans. For example, many 401(k) plans now provide a brokerage feature where employees are free to invest in virtually any publicly traded stock, bond, or mutual fund. Be wary of "turnkey" 401(k) plans offered by insurance and mutual fund companies. These plans are often riddled with high internal fees and poor performance in their limited investment options.
  
  There are several retirement plan options for the small business owner; the key is finding the plan that fits your needs appropriately. When designing a retirement plan, you must not only plan for your current situation, but your future needs as well.

Owen Malcolm, CFP, is vice president and CFO of Sanders Financial Management. He can be reached at (770) 448-5111 or at omalcolm@sandersfmi.com.