Accessory Dwelling Units, or ADUs, are becoming a popular housing solution across the Cape, where the housing market is tight and rental demand is high.

ADUs can take many forms. There is a lot of interest and momentum in standalone structures, but  traditionally they have taken the form of a converted garage or basement apartment. They are fully functional homes with their own kitchens, bathrooms, living areas, and often modest yard space and parking.

ADUs also can be a practical choice for homeowners seeking to maximize their property’s value. An ADU can provide homeowners with a revenue stream; however, there are upfront costs to convert or build the space. Cape & Coast Bank offers financing solutions to help homeowners realize an ADU investment. The right approach depends on your financial situation, project specifics, and long-term goals.

A Home Equity Line of Credit (HELOC) is one of the most popular ways to finance an ADU. It allows homeowners to borrow against the equity in their existing property, offering a flexible and cost effective way to access funds as needed for construction. HELOCs offer flexibility, allowing you to borrow only what you need, when you need it. During what is called the draw period, you may only be required to pay interest on the amount borrowed, holding down initial costs. In addition, HELOCs often have lower interest rates compared to personal loans.

For those who prefer a fixed loan with predictable monthly payments, a home equity loan could be the right choice. With this approach a homeowner receives a lump sum based on their home’s equity, which is then repaid over time at a fixed interest rate. This method is ideal for homeowners who have a clear budget for their ADU  project and prefer the certainty of fixed payments.

Another alternative to consider is a construction loan. Cape & Coast Bank offers construction loans tailored to provide short-term financing, covering costs during the building process of your ADU. Once the project is complete, the loan converts to a traditional mortgage or be refinanced into another type of financing, such as a HELOC.

With several financing pathways available, Cape & Coast Bank provides personalized service to help homeowners make informed decisions. Our loan officers are well versed in all aspects of ADU financing and can recommend solutions to fit your unique needs.

Contact Cape & Coast Bank today to explore your options and take the first step toward building an ADU. Whether you’re in the planning phase or ready to break ground, our team is here to help homeowners unlock the potential of their property and contribute to addressing housing needs in our region.

Charlotte Green is First Vice President, Residential Mortgage Sales Manager, NMLS# 994452, at Cape & Coast Bank.

MEMBER FDIC | MEMBER DIF | EQUAL HOUSING LENDER NMLS# 520663.

529 savings plans are tax-advantaged education savings vehicles and one of the most popular ways to save for college today. They can also be used to save for K-12 tuition. Much like the way 401(k) plans changed the world of retirement savings a few decades ago, 529 savings plans have changed the world of education savings.

529 plans were created by Congress in 1996 and have been modified through the years by various pieces of legislation. Known officially as “qualified tuition programs” or QTPs, 529 plans are so named because they are governed by section 529 of the Internal Revenue Code.

Tax advantages and more

529 savings plans offer a unique combination of features that no other education savings vehicle can match:

• Federal tax advantages: Contributions to a 529 account accumulate tax deferred and earnings are tax free if the money is used to pay the beneficiary’s qualified education expenses. (The earnings portion of any withdrawal not used for qualified education expenses is taxed at the recipient’s rate and subject to a 10% penalty.)
• State tax advantages: States are free to offer their own tax benefits to state residents, such as a tax deduction for contributions.
• High contribution limits: Most plans have lifetime limits of $350,000 and up (limits vary by state).
• Unlimited participation: Anyone can open a 529 savings plan account, regardless of income level.
• Wide use of funds: Money in a 529 savings plan can be used to pay the full cost (tuition, fees, housing, food, books, supplies) at any accredited college or graduate school in the United States or abroad; for certified apprenticeship programs (fees, books, supplies, equipment); for student loan repayment (there is a $10,000 lifetime limit per 529 plan beneficiary and $10,000 per each of the beneficiary’s siblings); and for K-12 tuition expenses up to $10,000 per year.
• Professional money management: 529 savings plans are offered by states, but they are managed by designated financial companies who are responsible for managing the plan’s underlying investment portfolios.
• Flexibility: Under federal rules, you are entitled to change the beneficiary of your account to a qualified family member at any time as well as roll over (transfer) the money in your account to a different 529 plan once per calendar year without income tax or penalty implications.
• Accelerated gifting: 529 savings plans offer an estate planning advantage in the form of accelerated gifting. This can be a favorable way for grandparents to contribute to their grandchildren’s education while paring down their own estate, or a way for parents to contribute a large lump sum. Under special rules unique to 529 plans, a lump-sum gift of up to five times the annual gift tax exclusion amount ($18,000 in 2024) is allowed in a single year, which means that individuals can make a lump-sum gift of up to $90,000 and married couples can gift up to $180,000. No gift tax will be owed, provided the gift is treated as having been made in equal installments over a five-year period and no other gifts are made to that beneficiary during the five years.
• Transfer to ABLE account: 529 account owners can roll over (transfer) funds from a 529 account to an ABLE account without federal tax consequences. An ABLE account is a tax-advantaged account that can be used to save for disability-related expenses for individuals who become blind or disabled before age 26.

Choosing a 529 savings plan

Although 529 savings plans are governed by federal law, their implementation is left to the states. Currently, there are over 50 different savings plans available because many states offer more than one plan.

You can join any state’s 529 savings plan, but this variety may create confusion when it comes time to select a plan. Each plan has its own rules and restrictions, which can change at any time. To make the process easier, it helps to consider a few key features:

• Your state’s tax benefits: A majority of states offer some type of income tax break for 529 savings plan participants, such as a deduction for contributions or tax-free earnings on qualified withdrawals. However, some states limit their tax deduction to contributions made to the in-state 529 plan only. So make sure to understand your state’s rules.
• Investment options: 529 savings plans vary in the investment options they offer. Ideally, you’ll want to find a plan with a wide variety of investment options that range from conservative to more growth-oriented to match your risk tolerance. To take the guesswork out of picking investments appropriate for your child’s age, most plans offer aged-based portfolios that automatically adjust to more conservative holdings as your child approaches college age. (Remember, though, that any investment involves risk, and past performance is no guarantee of how an investment will perform in the future. The investments you choose may lose money or not perform well enough to cover college costs as anticipated.)
• Fees and expenses: Fees and expenses can vary widely among plans, and high fees can take a bigger bite out of your savings. Typical fees include annual maintenance fees, administration and management fees (usually called the “expense ratio”), and underlying fund expenses.
• Reputation of financial institution: Make sure that the financial institution managing the plan is reputable and that you can reach customer service with any questions.
• User experience: Is the plan’s website easy to use? Can you easily take care of routine tasks online, such as set up automatic monthly contributions, change your contribution amount, research plan investments, find your rate of return, or request a withdrawal?

With so many plans available, it may be helpful to consult an experienced financial professional who can help you select a plan and pick your plan investments. In fact, some 529 savings plans are advisor-sold only, meaning you must go through a designated financial advisor to open an account.

Account mechanics

Once you’ve selected a plan, opening an account is easy. You’ll need to fill out an application, where you’ll name a beneficiary and select one or more of the plan’s investment portfolios to which your contributions will be allocated. Also, you’ll typically be required to make an initial minimum contribution, which must be made in cash or a cash alternative.

Thereafter, most plans will allow you to contribute as often as you like. This gives you the flexibility to tailor the frequency of your contributions to your own needs and budget, as well as to systematically invest your contributions by setting up automatic monthly transfers from your bank account.

As for investment changes, beware that under federal law you are allowed to exchange your existing plan investments for new investments only twice per year. In other words, if your existing plan funds are currently invested in plan portfolios A & B but you want to change them to plan portfolios C & D, you can do this only twice per calendar year. However, you generally have unlimited say in how your future contributions will be invested.

You will also be able to change the beneficiary of your 529 savings account to a qualified family member with no income tax or penalty implications.

529 prepaid tuition plans — a distant cousin

There are actually two types of 529 plans — savings plans and prepaid tuition plans. The tax advantages of each are the same, but the account features are very different. A prepaid tuition plan lets you prepay tuition at participating colleges, typically in-state public colleges, at today’s prices for use by the beneficiary in the future. 529 prepaid tuition plans are generally limited to state residents, whereas 529 savings plans are open to residents of any state. Prepaid tuition plans are much less common than savings plans.

Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing; specific plan information is available in each issuer’s official statement. There is the risk that investments may not perform well enough to cover college costs as anticipated. Also, before investing, consider whether your state offers any favorable state tax benefits for 529 plan participation, and whether these benefits are contingent on joining the in-state 529 plan. Other state benefits may include financial aid, scholarship funds, and protection from creditors.

Contact us to get started

This content has been reviewed by FINRA.

Prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Services, Inc.

Investment and insurance products and services are offered through OSAIC INSTITUTIONS, INC., Member FINRA/SIPC. Osaic Institutions and the bank/credit union are not affiliated. Products and services made available through Osaic Institutions are not insured by the FDIC/NCUA or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank, bank affiliate, credit union, or credit union affiliate. These products are subject to investment risk, including the possible loss of value.

 NOT FDIC/NCUA-INSURED. NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY. NOT GUARANTEED BY THE BANK/CREDIT UNION. MAY GO DOWN IN VALUE.

Unfortunately, scammers never take a break and lately banks are seeing a concerning trend: the rise of check fraud. As a business owner, you may be asking yourself – “How can I best protest my operational checking accounts from check fraud?”

The best option to safeguard against check fraud is get “Positive Pay.” Not only does it fight check fraud, but also it’s available free of charge at Cape & Coast Bank.

Positive Pay is a program with two parts: Check Positive Pay and ACH Positive Pay.

Check Positive Pay matches checks issued by a business with those presented for payment. Information loaded into the Positive Pay portal includes the check number, check date, dollar amount, and payee name.

As checks are presented to the bank, Positive Pay compares each check with the information on file. If details do not match, the business will receive an email alert prompting a review of any discrepancies, also enabling the issuer to make a pay or return decision for each item.

ACH Positive Pay protects against electronic payments fraud. It prevents unauthorized companies pulling funds from your business account. For example, ACH Positive Pay monitors debits to a business account based on rules established for various vendors.

Vendors to whom regular payments are sent can be added to an approved list. Vendors not authorized to withdraw funds from an account can be added to a blocked List. Whenever an ACH debit transaction that does not meet rules established by a business is detected, an alert is issued, and action can be taken.

Positive Pay is easy to use, featuring multiuser access with specific levels of authority, flexible check file formats, and the ability to cache up to a year’s worth of historical data.

Cape & Coast Bank encourages all business clients to enroll in Positive Pay. Not only is it a safeguard against suffering monetary loss, but it also saves untold hours of time that might otherwise be spent investigating a case of fraud. In addition, a business’s reputation is protected.

Cape & Coast Bank is committed to community, and that includes the safety and success of your business.

Stephanie Burbine is the Cash Management Officer at Cape & Coast Bank. She can be reached at 508.568.3213 or sburbine@mycapecodbank.com.

It’s America Saves Week! Each year, we encourage our community to dedicate this week to pause and do a financial check-in, and this year is no different. Join us this week to get a clear view of where your finances are, where you want them to be, and what small steps you can take to put you on a path forward.

We all have unique circumstances that in many cases, makes it difficult, or nearly impossible for many to save at this stage of their lives. Despite this, we understand that people are still committed to doing the work, taking control of their finances, and becoming more financially stable – in every stage of life.

Saving on Autopilot

Sometimes the smallest things have the greatest impact— like building the habit of saving, even if it’s just a little bit at a time. In fact, saving is a habit, not a destination! Check out this blog post from the America Saves Team, who breaks it all down.

If you haven’t already:

• Set up automatic savings, either through your employer or financial institution.
• Revisit the amount you contribute, if you have already established automatic savings.
• Assess whether you have the best possible account for your savings and consider switching to a high-yield savings account to get the most out of savings.

Whether you choose to split your direct deposit or set up an auto-transfer through your financial institution, you benefit by automatic savings in two ways: first, by establishing the habit, and second by setting and reaching attainable milestones that will be incredibly useful when and if an unexpected expense arises.

Saving for the Unexpected

It happens to all of us: You’re saving for something that you’re really excited about and before you know it an unexpected event occurs, causing you to dip into your designated savings.

Every day, Americans are forced to use money they were saving for something they truly value or credit to pay for an unexpected expense. Check out this blog post from the America Saves Team, who breaks down saving for competing priorities while establishing your savings goal(s).

• Begin to understand your Money Story and Money Values.
• Identify your savings goals.
• Use automatic savings to begin or grow your emergency savings accounts.

Saving for Milestones

How do you save for the big things, like homeownership, retirement, and education, when saving for the small things is difficult? Saving for competing priorities can feel overwhelming, but there are ways to break these big goals down into reasonable, practical steps even if you aren’t where you want to be financially.

• Get a clear view of your financial landscape.
• Establish or revisit your Spending and Savings Plan.
• Learn a practical approach to saving for short, mid, and long-term financial goals.

(P.S. Register for America Saves’ LIVE workshop Wednesday, where they break this all down right alongside you.).

Additional Resources from our friends at America Saves to support you today:

• BLOG POST: Saving for Competing Priorities
• BLOG POST: Saving for Major Milestones When You’re Young & Just Starting Out
• PODCAST EPISODE: Saving for Major Life Milestones

Paying Down Debit IS Saving

Just like having a plan for saving is important, so is having a plan to pay down your debt. Recent reports show that individuals have increased their usage of credit cards due to the ongoing inflation and rising costs of our basic needs like housing, food, and transportation.

Couple that with the return of student loan debt repayment and the interest rates increase, and the ability to pay down debt is exacerbating the savings crisis, hindering the ability to save for emergencies and remain financially stable for many Americans.

• Check your credit report
• Grab your credit score at annualcreditreport.com

Saving At Any Age

Talking about money has been considered taboo for too long, but this mindset could be doing us a disservice. After all, it’s not what you say but how you say it.

You’ve gained valuable insights this week, and the next step is to share those learnings and check-in with your loved ones.

• Talk to family members, whether it be your own kids to older generations, about your money story and goals, including retirement plans, the importance of saving, and responsibly using credit.
• If you haven’t, open up a savings account that correlates with what matters most to you right now.

We hope these tips are insightful, and you’ve been able to pause to do a financial check-in, allowing you to get clear on where your finances are, where you want them to be, and what small steps you can take now to put you on that path.

Every day, a steady stream of visitors cross the Cape Cod Canal bridges ready and willing to spend money at our local small businesses, restaurants, galleries and service providers. But now, more than ever, that buying power is not in the form of paper currency.

Are you ready to maximize revenue by safely accepting multiple forms of payment for goods and services and easily making fast, frictionless and secure deposits? If not, you should be.

The first step is to work with a community bank vested in local business success to evaluate cash management services. These services will help your business maximize and manage cash flow, increase operational efficiencies and maximize earnings on account balances.

Key components to an effective cash management strategy should include an all-in-one payment processing system for credit card transactions; a secure method for depositing checks directly from your office or business location using a bank-issued scanner, computer and internet connection; an ACH origination service that provides the ability to collect recurring payments from customer checking and savings accounts; and a lockbox service that collects and processes payments sent to a dedicated post office box and deposits the funds directly into your business account.

Other essential elements for a robust cash management initiative include the ability to send ACH or wire transfer instructions to a bank from your business location, and fund management solutions such as a line of credit sweep, which automates transfers from a commercial line of credit to meet daily cash needs and reduce interest expense.

Fortunately for local businesses, Cape & Coast Bank has recently introduced a full suite of cash management solutions that can be customized to meet the unique needs of every business. Cash management products are not a one-size-fits-all solution, and a strong banking partner with expertise and experience implementing these services and products is essential to success.

The Coop has also introduced Positive Pay, a powerful fraud prevention solution that protects its clients’ business accounts from fraud by monitoring for unauthorized ACH and check transactions.

To schedule a meeting with The Coop’s Cash Management team to evaluate product and service offering that may be a good fit for your business, call 508-568-3260 or email cashmanagementsupport@mycapecodbank.com. More information about The Coop’s offerings can be found at mycapecodbank.com as well.

Stephanie Burbine is First Vice President, Cash Management Officer at Cape & Coast Bank. She can be reached at sburbine@mycapecodbank.com or 508-568-3213

One of the most important functions of business records is to prepare you (or your accountant) for filing tax returns.

To help make things easier for yourself, you may want to set up a record-keeping system that captures information in a way that matches the demands of the IRS.

If you are a sole proprietor, you’ll want to familiarize yourself with the requirements for completing Form 1040, Schedule C.

Here are some tax considerations to remember in relation to your record-keeping system design (for more information, see IRS Publication 334, “Tax Guide for Small Business”):

• If your small business is one that carries no inventory, then you can generally use the cash method of accounting.
• If you produce, purchase, or sell merchandise, you typically must keep an inventory and use the accrual method of accounting. However, there are exceptions to this rule if you are a “qualifying taxpayer” or a “qualifying small business taxpayer.” You are a qualifying taxpayer if your average annual gross receipts are $1 million or less and your business is not a tax shelter. You are a qualifying small business taxpayer if: your average annual gross receipts are less than $10 million; you are not prohibited from using the cash method as defined by Section 448 of the Internal Revenue Code; and your business is an eligible business as defined in IRS Publication 538.
• The business-related portion of deductible car or truck expenses may be the actual expenses incurred (including gas, oil, tires, repairs, insurance, depreciation, and rent or lease payments), or you may elect to take the standard mileage rate.
• Small businesses may elect under IRC Section 179 to expense the cost of qualified property, rather than recover such costs through depreciation deductions.
• You may deduct any contributions to employee benefit plans (such as health insurance plans and other fringe benefits) or contributions to pension or profit-sharing plans that are for the benefit of employees.
• You may deduct the cost of business supplies purchased during the tax year.
• You may deduct the cost of utilities associated with business use.
• You can deduct professional fees, such as those paid to your accountant.

Remember to save any records and underlying documentation, such as invoices or receipts, relevant to your tax return for at least three years. And don’t hesitate to talk with your accountant or tax advisor for more guidance.

Robert Martin, CCSCS, CIMA, is an Osaic Institutions Investment Executive at Cape Cod Financial Services at Cape & Coast Bank. He can be reached at 508.568.1250 or robert.martin@osaicinstitutions.com. 

Investment and insurance products and services are offered through Osaic Institutions, Inc. Member FINRA/SIPC. Cape Cod Financial Services is a trade name of the bank. Osaic Institutions and the bank are not affiliated. Products and services made available through Osaic Institutions are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2023.

As the New Year approaches, we’re all thinking about resolutions and goals. Before you dive in, consider reviewing your credit score. You may be asking, what goes into “good credit.” Let’s look at the five prongs that go into a credit score, starting from the lowest to the highest. So at 10% your credit mix.

• 10% Current Credit Mix: That’s the profile of your accounts: credit cards, student loans, auto loans, home loans, etc.
• 10% Inquiries: Multiple inquiries can damage your score because there’s the perception that you might be financially troubled. For example, if you’re applying for a mortgage and have four credit card inquiries and an auto loan inquiry, the underwriter might wonder if you’re going to have more debt that might affect your ability to repay. We wouldn’t worry about opening up one or two new store credit cards. However, going gangbusters and making five to 10 inquiries for new credit could affect your score.
• 15% Length of Credit:  The longer you’ve had credit, the stronger your credit can become because you’ve proved a history of credit utilization.
• 30% Account Utilization and Balances: This is a really key part, and it’s one of the biggest pieces that people can work on: how much credit you’ve used relative to your available credit line. If you have a credit card with $1,000 limit and have an $800 balance, that’s going to be flagged on the report as a bit risky and will negatively affect your score. So, what can you do? Look at your limit and keep your balance at or below 30% of that credit limit for the account. At the 30% mark, typically your credit is going to report neutral. If you’re above 50%, your credit is going to report negatively on a monthly basis even if you’re paying that bill. Over time, it could affect your scores and bring them down into a less than positive range.
• 35% Payment History: Making sure you’re paying bills on time plays into that credit score. The payment history isn’t something that you can control retroactively, but your payment history does age. If you’ve had trouble making payments in the past and you’re able to get yourself back on track with making those payments on a monthly basis over time, your scores will improve.

Should I close my old credit cards?

You might think that by closing unused, old credit cards, you’d improve your credit score. Who cares about that Victoria’s Secret card from 15 years ago? Well, closing that can negatively affect your score because those old card could have positive payment histories or low utilization. They could sit there, behind the scenes, positively affecting your credit score.

What do the different levels of credit scores mean?

• Poor: Anything under 580.
• Decent: 580 to 660. Typically, for a mortgage, you’ll need above 620. Terms do get more competitive when you have a higher credit score because you’re a lesser risk.
• Good: 680 to 720.
• Very good: 720 to 780.
• Excellent: 780 to 850.

I’ve got credit cards, but what if I never use them?

Bad idea. It’s called “ghost credit” because you don’t have any payment history. Remember, you need to use credit to build it. If you’re new to credit or trying to reestablish credit, consider getting a credit card and use it just for purchases you need to make anyway and pay it off in full at the end of the month. That way you’re not paying interest but you’re building credit in a positive manner.

If you have any questions, your banker is here to help. We can help solidify your plans as well as help achieve your financial goals. In addition, we can help you plan for those life-changing situations or unexpected expenses.

Here’s to a Happy New Year!

Charlotte H. Green is Vice President, Residential Mortgage Sales Manager.

Small business owners and entrepreneurs have tremendous resources in our region, many of which are untapped and maybe even unknown. SEED Corporation is one of those assets that every small business owner and aspiring entrepreneur should familiarize themselves with.

SEED, South Eastern Economic Development Corporation, is a small business lender that provides financing to both start-up and existing businesses in Massachusetts and Rhode Island.  As a nonprofit organization, it is an SBA-certified lender that has been providing assistance to our small business community for nearly 40 years.

Just how does SEED play a role and how is it different than a traditional bank loan?  As opposed to competing with banks and credit unions, SEED acts as a partner to provide gap financing when traditional bank loans cannot be secured. Perhaps your bank can’t finance your request because of collateral, credit or number of years in business. Or maybe your industry is one that the bank can’t lend to due to regulatory factors. Maybe your bank can provide some financing, but not one hundred percent. In these cases, your bank can send your loan request to SEED or work directly with SEED to fill the financing gap.

SEED loans range from micro loans up to $50,000 and small loans up to $250,000. They also offer larger SBA 504 loans designed to work in conjunction with local lenders who want to partner on loan projects while mitigating risk. Funds can be used for a variety of uses, including refinancing, real estate, business acquisition, build-outs, inventory, working capital, furniture, fixtures and much more. SEED’s small loan programs provide term loans with reasonable rates and no pre-payment penalties, and all loans are serviced in-house.

Given the scope and the flexibility they offer, SEED loans can be appropriate for businesses of all sizes, including the vast small business community on the Cape and Plymouth County.

Beyond financing, SEED offers extensive educational opportunities for business owners looking to start up or scale their business. Through their Business Assistance Program, they offer monthly entrepreneurial workshops, individual financing consultations, business plan templates and an array of business planning assistance available through the various SBA resource partners. These services are all free.

It’s important to note that your first step when seeking financing should always be your local bank who you have an established relationship with. In fact, SEED requires that you start there for any loan request over $20,000.

The pandemic, inflation and tight labor market have a created a challenging trifecta for our business community, particularly as we enter the “high” season. It’s important to know about resources offered by organizations like SEED and others so you can potentially benefit from the wealth of support they offer. Your local banker is a trusted partner who can connect you with these valuable resources. Tap into their knowledge!

Allyson Brainson is a Vice President and Small Business Relationship Manager with The Cooperative Bank of Cape Cod. Contact Allyson at 508.568.1205 or abrainson@mycapecodbank.com.

 

If you are self-employed or own a small business and you haven’t established a retirement savings plan, what are you waiting for? A retirement plan can help you and your employees save for the future.

Tax advantages

A retirement plan can have significant tax advantages:

• Your contributions are deductible when made.
• Your contributions aren’t taxed to an employee until distributed from the plan.
• Money in the retirement program grows tax deferred (or, in the case of Roth accounts, potentially tax free).

Types of plans

Retirement plans are usually either IRA-based (like SEPs and SIMPLE IRAs) or “qualified” (like 401(k)s, profit-sharing plans, and defined benefit plans).

Qualified plans are generally more complicated and expensive to maintain than IRA-based plans because they have to comply with specific Internal Revenue Code and the Employee Retirement Income Security Act of 1974 requirements in order to qualify for their tax benefits. Also, qualified plan assets must be held either in trust or by an insurance company.

With IRA-based plans, your employees own (i.e., “vest” in) your contributions immediately. With qualified plans, you can generally require that your employees work a certain numbers of years before they vest.

Which plan is right for you?

With a dizzying array of retirement plans to choose from, you’ll need to clearly define your goals before attempting to choose a plan. Ask yourself, do you want:

• To maximize the amount you can save for your own retirement?
• A plan funded by employer contributions? By employee contributions? Both?
• A plan that allows you and your employees to make pre-tax and/or Roth contributions?
• The flexibility to skip employer contributions in some years?
• A plan with lowest costs? Easiest administration?

The answers to these questions can help guide you and your retirement professional to the plan (or combination of plans) most appropriate for you.

What are SEPs?

A SEP allows you to set up an IRA (a “SEP-IRA”) for yourself and each of your eligible employees. You contribute a uniform percentage of pay for each employee, although you don’t have to make contributions every year, offering you some flexibility when business conditions vary. The plan must cover any employee aged 21 or older who has worked for you for three of the last five years and who earns $650 or more.

What is a SIMPLE IRA?

The SIMPLE IRA plan is available if you have 100 or fewer employees. Employees can elect to make pre-tax contributions in 2022 of up to $14,000 ($17,000 if age 50 or older; up from $13,500 and $16,500, respectively, in 2021). You must either match your employees’ contributions dollar for dollar — up to 3% of each employee’s compensation — or make a fixed contribution of 2% of compensation for each eligible employee.

What is a 401(k)?

The 401(k) plan is a popular retirement savings vehicle for small businesses. With a 401(k) plan, employees can make pre-tax and/or Roth contributions in 2022 of up to $20,500 of pay ($27,000 if age 50 or older; up from $19,500 and $26,000, respectively, in 2021). These deferrals go into a separate account for each employee and aren’t taxed until distributed. Generally, each employee with a year of service must be allowed to contribute to the plan. You can also make employer contributions to your 401(k) plan — either matching contributions or discretionary profit-sharing contributions.

As an employer, you have an important role to play in helping America’s workers save. Now is the time to talk to your investment advisor about the best retirement plan programs for you and your employees.

Robert Martin, CCSCS, CIMA, is an Osaic Institutions Investment Executive at Cape Cod Financial Services at The Cooperative Bank of Cape Cod. He can be reached at 508.568.1250 or robert.martin@osaicinstitutions.com.

 

Investment and insurance products and services are offered through Osaic Institutions, Inc. Member FINRA/SIPC. Cape Cod Financial Services is a trade name of the bank. Osaic Institutions and the bank are not affiliated. Products and services made available through Osaic Institutions are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value. NOT A DEPOSIT NOT FDIC INSURED NOT GUARANTEED BY THE BANK NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY MAY GO DOWN IN VALUE

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2022.