Retirement Plans for Your Small Business – Ted Jenkin, Oxygen Financial

On today’s episode of The Atlanta Small Business Show, we welcome Ted Jenkin, CEO and founder of Oxygen Financial. Ted explains how business owners can prepare for their own retirement as well as provide options to their employees.


Jim Fitzpatrick: Yeah. Great. There’s so many small business owners out there I know right now, that are watching us. The same and this next topic of retirement plans. You know, there’s a lot of small business people that go, “Ooh, that’s right. I may retire one day and what do I have leftover?” Often times we find small business owners don’t put enough aside from themselves. They’ll take care of their employees and they provide great benefits and such, but they’re not necessarily thinking of themselves. Talk to us a little, bit about that. I know that you are an expert in this area, and that’s why we have you on the show. Your content is phenomenal. Talk to us about what small business owners need to focus on in putting enough aside for retirement.

Ted Jenkin: Well, it’s complicated because, a lot of small business owners, their retirement plan is predicated on two things. One is, I hope to sell my business some day. Whether I sell it to family, or I sell it to a third party, I’m gonna have some exit …

Jim Fitzpatrick: Right.

Ted Jenkin: down the road, or what business owners tend to like after that is real estate. I’m relying on the fact that one day I’m gonna sell the building that I bought, that I’m running my business in …

Jim Fitzpatrick: Yeah.

Ted Jenkin: or I’m gonna buy multiple buildings and rent them out to other people.

Jim Fitzpatrick: Right.

Ted Jenkin: One thing to remember is that, the other kinds of retirement plans, although they may involve the stock market and the bond market, is to de-risk yourself from the business, right, which is that real estate, and the potential that the business won’t make it. You won’t be able to sell it down the road. Figuring out how to save money along the way is important, so you have multiple prongs to pick from [crosstalk 00:01:30] when you retire, right?

Jim Fitzpatrick: Sure.

Ted Jenkin: That business doesn’t sell …

Jim Fitzpatrick: Right.

Ted Jenkin: You’ve gotta have other resources to [crosstalk 00:01:34] be able to find your retirement.

Jim Fitzpatrick: Cash is king, so you wanna have something that’s more liquid than maybe holding onto a piece of real estate, correct, that may or may not be worth that much money in the end.

Ted Jenkin: Well, that’s right. I think sometimes small business owners get fooled by their net worth on paper.

Jim Fitzpatrick: Right.

Ted Jenkin: Real estate, depending upon the market may or may not be liquid. The business for sure, depending upon the seller …

Jim Fitzpatrick: That’s right.

Ted Jenkin: You may not get what you think it’s worth on paper just [crosstalk 00:01:56] like selling a piece of real estate.

Jim Fitzpatrick: Right.

Ted Jenkin: Having this liquidity of other money helps you drive additional income in retirement.

Jim Fitzpatrick: Sure. Let’s drill down a little bit. What should a business owner be focused on? What should they do?

Ted Jenkin: When you talk about the very small, small business owners, there’s two plans that you do not have to do any reporting to the IRS. One is called, a simple plan.

Jim Fitzpatrick: Okay.

Ted Jenkin: It sounds like it sounds. It’s a savings incentive match plan. It’s spelled S-I-M-P-L-E.

Jim Fitzpatrick: I was gonna say, that’s an acronym.

Ted Jenkin: Yeah, it’s an acronym.

Jim Fitzpatrick: Yeah, okay.

Ted Jenkin: It basically is an IRA plan, but it’s designed for businesses that have less than 100 people. In this kind of business, every employee can put away money into their own plan, including the owner.

Jim Fitzpatrick: Right.

Ted Jenkin: No matter who puts away money, you can save up to 12,500 dollars a year. Once you turn the age of 50, you can do up to 15,500 dollars a year.

Jim Fitzpatrick: Okay.

Ted Jenkin: Now, the one drawback is that the owners might have to do a small match. You choose one percent, two percent, three percent. The reality is, if you’re looking and you have four, or five employees, this could be a pretty neat plan to put into place.

Jim Fitzpatrick: Yeah, for sure. What’s involved in putting that into place? Are there many upfront fees, or …

Ted Jenkin: This is what’s great for a small business owner, this plan is it costs literally nothing to set this thing up. You can go to any major bank, brokerage house, financial advisor. You can get this set up and then each participant has their own individual account. You don’t have that liability as an employer to decide what goes in the investment. If your participants plans, they can choose themselves. There’s also one other plan, what I recommend for a sole practitioner, or somebody that may only have one employees. That’s called a SEP, an S-E-P, which is a simplified employee pension plan. That S-E-P plan is really great, cause you can put away up to 25% of your salary. You can bank a lot of money.

Jim Fitzpatrick: Wow.

Ted Jenkin: You can do up to 55,000 dollars a year, which is really big.

Jim Fitzpatrick: Sure.

Ted Jenkin: The drawback is, whatever you do for your employees that have worked there in at least three out of five years, you’ve got to do for them as well. If you have [crosstalk 00:03:46] highly compensated employees, it could be a drawback. That also, Jim, has no paperwork that’s required with the IRS. Those plans are really designed for small, smaller businesses.

Jim Fitzpatrick: Okay. What are you defining as a small business? Is it a dollar amount or is it the number of employees?

Ted Jenkin: You know, mostly for these small businesses that I’m talking about, you’re talking about under 10 or 20 employees.

Jim Fitzpatrick: Okay.

Ted Jenkin: That’s typically where these plans will fall. I will say if you’re a 1099, or just a single practitioner, one person in the business, there’s now something called a solo 401K.

Jim Fitzpatrick: Okay.

Ted Jenkin: 401K for one person.

Jim Fitzpatrick: Okay.

Ted Jenkin: This looks and acts just like a 401K, if you were at IBM or Coca Cola.

Jim Fitzpatrick: Oh wow.

Ted Jenkin: Costs nothing to set up or very minimal …

Jim Fitzpatrick: Right.

Ted Jenkin: depending upon where you set it up. It looks just like a 401K.

Jim Fitzpatrick: That’s great.

Ted Jenkin: You can put away up to 18,500 dollars a year if you’re under 50, 24,500 dollars a year if you’re 50 or older, and you can match yourself up to 25%. Somebody who takes 100,000 dollar salary in their own business …

Jim Fitzpatrick: Right.

Ted Jenkin: Can literally put away 50,000 dollars or more into a plan like that, and have borrowing capabilities.

Jim Fitzpatrick: Nice.

Ted Jenkin: On the IRA accounts, you don’t, just like any IRA. This one you do.

Jim Fitzpatrick: Right.

Ted Jenkin: It’s pretty cool.

Jim Fitzpatrick: That’s very good. That’s very good. For the small business owners that are watching right now … I’m a small business owner. We have a tough time paying ourselves. I mean, we take care of everything else, and make sure everything is paid in terms of the company, and the employees, the payroll, the overhead. It’s hard to take money out of the business sometimes, and say, “We’re gonna put this away for ourselves down the road.” Do you find that to be the case with small business owners?

Ted Jenkin: Yeah. I mean, I think all business owners will tell you that their very best rate of return on the money is their business.

Jim Fitzpatrick: Is there business.

Ted Jenkin: It kind of makes sense.

Jim Fitzpatrick: Yeah.

Ted Jenkin: You can see the investment.

Jim Fitzpatrick: Sure.

Ted Jenkin: You can quantify the rate of return, which is why most owners invest back in the company.

Jim Fitzpatrick: Right.

Ted Jenkin: However, as you grow the number of employees in your business, you have to consider things like, “How do I retain my employees?”

Jim Fitzpatrick: Yeah.

Ted Jenkin: Having a retirement plan in place, is a recruitment and retention tool.

Jim Fitzpatrick: Yeah it is.

Ted Jenkin: Right? It allows people to save for their own retirement.

Jim Fitzpatrick: That’s right.

Ted Jenkin: If you match them, or you put a profit sharing plan into place, you could say, “Well, here’s a way I put some golden handcuffs on people in the company,”

Jim Fitzpatrick: Right.

Ted Jenkin: by saying, “If the company does well …

Jim Fitzpatrick: Right.

Ted Jenkin: We’ll put some money into your plan …

Jim Fitzpatrick: Right.

Ted Jenkin: But you have to be here five years, or six years to reap the full benefits of the money that I put into your plan.

Jim Fitzpatrick: Exactly. Ted Jenkin, thank you so much for joining us on the Atlanta Small Business Show. We appreciate it. The feedback and the insight that you give us is just phenomenal. Thanks again for joining us.

Ted Jenkin: Thanks.


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