Corporate retirement plan

A corporate retirement plan refers to a powerful retention tool that provides employees with income during retirement based on their length of service and salary history. Corporate retirement planning is used by businesses to increase profits, strengthen brand identity, provide employee satisfaction, and gain exposure in order to grow as a company. Establishing a successful benefits program for employees has become a challenge for many companies today. The primary goal of corporate retirement planning is to ensure employee satisfaction by improving employee education and creating a savings plan for their future. Successful businesses use corporate retirement planning to leverage their resources judiciously. The corporate retirement planning strategy is applied by businesses to transform goals into tactical plans, find out new loopholes, and implement new strategies to achieve strategic development. Corporate retirement planning involves the organization of systems, and setting objectives to ensure employee awareness and involvement in active decision-making. Businesses that adopt corporate retirement planning ensure they achieve their goals by integrating short and long-term goals set by an organization.

The main objectives of corporate retirement planning

For a business to succeed, it needs to understand the market and its ambitions. It needs to set clear goals that will ensure the operations are profitable. The main objective of corporate retirement planning is to encourage saving practices, acquire financial planning knowledge, and identify the available resources to achieve profitability. Corporate retirement planning also aims to monitor and control the business plan to ensure all employees achieve their future savings goals. Metrics used in corporate retirement planning include financial information and the level of customer satisfaction. As the business grows, corporate retirement planning aims to review the business progress and determine the challenges faced, and how to improve revenue streams in the future.

Importance of corporate retirement planning

Achievement of long-term goals

Businesses perform corporate retirement planning to set a blueprint for achieving long-term goals in a stipulated time period. Long-term goals are essential for a business to focus on maintaining the workforce and increasing productivity. Through corporate retirement planning, organizations are able to ensure all employees are engaged in their respective roles with deadlines to ensure efficiency and effectiveness. Corporate retirement planning also brings cooperation and harmony between managers, supervisors, and employees, encouraging them to work together to achieve a common objective.

Better decision making

The success of a business is based on the effectiveness of the business decisions. Developing a clear retirement plan helps an organization to make the best decisions that are vital in achieving its mission statement. Corporate retirement planning is performed in consideration of the customers’ needs and the organization’s resources. The plan is also structured according to the skills of the employees and the company’s interests. Therefore, business managers should consider the interests of the customers, the company, and employees before making a decision that affects the business. Formulating a clear corporate retirement plan helps the managers to hire the right personnel, invest in the most viable and needed areas, and arrange funds according to needs and tasks.

Saves money

Corporate retirement planning forms budgets that can help save a significant amount of capital. Effective budgeting helps an organization allocate the available financial resources according to what is needed most. This helps in cutting out unintended expenses that can lead to a wastage of money. Corporate retirement planning helps in creating a detailed budget that indicates the amount of money earned and spent to prevent confusion while allocating funds to different projects. A company should always have clear records of what it can and cannot afford.

A measure of success

Companies use corporate retirement planning as a metric when determining the success rate of particular goals and objectives. Corporate retirement planners monitor and review an organization’s projects to analyze its current progress and implement the necessary changes needed to ensure its success. Some changes could be: hiring more employees, replacing personnel, or upgrading machinery. Effective corporate retirement planning helps organizations to find and evaluate loopholes that impede ways of achieving success. Therefore, organizations can devise new plans and strategies to ensure the effectiveness and efficiency of all activities and to achieve the mission statement.

Advantages of corporate retirement planning

Prevents uncertainty

Every business is subject to emergencies and risks that can affect its productivity. Effective corporate retirement planning helps in anticipating risks and taking action to prevent adverse effects on the organization. Corporate retirement planning uses the company’s historical data to study and predict future trends in its business, industry/field, and line of work. Although it may not predict the future with certainty, it alerts the management to prepare for unforeseen circumstances and events that may harm the business and its employees. Therefore, business managers and owners can design effective contingency plans based on predicted uncertainties to ensure retiring employees have enough money to cater to their future needs.

Reduces ambiguity

Organizational units such as sales, purchasing, and accounting are included in the corporate retirement planning strategy. Corporate retirement planning also defines key functions of an organization such as product development or consultancy, and information systems such as specialized software and other supporting programs. This classification reduces ambiguity and creates clear boundaries for effective decision-making. It also clarifies market threats and opportunities in a business to ensure cost-effective strategies are implemented and used for improved, saving, and productivity.

Increases operational efficiency

Corporate planning is a methodical and organized way of achieving an organization’s goals and mission statement. Effective corporate planning ensures that all employees have a clear knowledge of their roles and objectives. In addition, retirement planning ensures that resources are effectively allocated, thus reducing costs, minimizing inconsistencies, and improving business profits. Effective allocation of time, money, information, and human resources is needed to increase the operational efficiency of the organization.

Types of corporate retirement planning

Defined contribution plans

Defined contribution plans were introduced in the 1980s to help businesses promote saving for their employees’ retirement. Defined contribution plans include 401(k)s, 403(b) plans, and 457(b) plans. 86% of companies also offer defined contribution plans to help an organization achieve its financial goals and employee satisfaction. The 401(k) is the most commonly defined contribution retirement plan used by businesses. Employees can contribute to this plan, and employers will often match a certain percentage of the money that they put in. This makes it easy for employees to invest in stocks, with help from their employer, without paying tax on gains.

IRA plans

An individual retirement account allows employees to save retirement money in a tax-advantaged way. With the traditional IRA, employees can make contributions from the money deducted from tax returns and grow earnings until retirement. All company employees can contribute to the IRA plan without incurring any tax. The IRA is popular in many companies because it provides valuable tax benefits and allows clients to purchase limitless bonds, stocks, and real estate as forms of investment.

Financial plans

A financial plan refers to a comprehensive picture of the company’s current finances and strategies set to achieve future financial goals. A good financial plan includes details about investments, savings, debts, cash flow, and all other elements of finance in a company. A financial plan allows entrepreneurs to meet their future goals by making the most of their assets. Financial plans also help the organization to make the right decision on sourcing capital, whether to issue additional equity or procure loans. An effective financial plan also helps the company evaluate all investments for maximum productivity and efficiency.

Contingency plans

Contingency planning involves making preemptive important decisions to counter unexpected emergencies and events. A contingency plan aims to prepare a company to respond well during a financial crisis or shortage of human resources. Effective contingency plans lead to timely interventions and disaster-relief operations. Not all changes in the market can be anticipated, which is why it is important to have a contingency plan to foresee most scenarios. Therefore, business leaders and corporate planners should have a contingency in place for effective business operation.

How can Arrowroot Family Office help you with your corporate retirement planning

Arrowroot Family Office is committed to ensuring small business owners recognize the essence of corporate retirement planning. Arrowroot Family Office can help employees, entrepreneurs, and organizations come up with strategic and financial plans for better productivity, resource allocation, and future financial stability. By combining a defined contribution plan, IRA plan, financial, and contingency plan, Arrowroot Family Office can help businesses create more wealth and save money. Arrowroot Family Office provides strategies for businesses to maximize profits and reduce taxes. Each strategy is specific to the needs and situations of every client. Arrowroot Family Office consists of advisors who create different types of plans for individuals and organizations to help them save money, control their businesses, and review progress.

There are several steps involved in corporate retirement planning for a business which are made easy and simple at Arrowroot Family Office. Arrowroot Family Office advisors help businesses determine the main objectives. The planners educate employees and business owners on the importance of saving and the right strategies. Strategy formulation is also conducted in light of the environmental diagnosis and analysis of the business. Arrowroot Family Office advisors also communicate with business accountants and lawyers to get a clear view of the capital structure. Understanding the business’s financial status helps in determining the possible areas of saving. Further, Arrowroot Family Office reviews the financial statements of the business to identify weak areas and necessary strategies for improvement. Advisors evaluate and manage possible risks in a business by reviewing the insurance policies and legal requirements. Arrowroot Family Office finalizes the corporate retirement plan by monitoring the business and employees’ financial progress and stability. Arrowroot Family Office also conducts periodic reviews to ensure the business achieves the set goals and objectives and implements necessary policies and adjustments to increase efficiency. Arrowroot Family Office understands the mistakes made by small business owners and focuses on improving decision-making and saving money through corporate planning.

Helping you achieve your evolving financial objectives

Frequently asked questions

Corporate retirement planning is the process used by individuals and companies to develop a course of action to grow, gain exposure, and increase savings for future use after retirement. Successful businesses use corporate retirement planning as a tool to leverage their resources over their competitors.
An effective corporate retirement plan combines vision and execution. It also fosters innovative thinking, risk anticipation, and ways of mitigating potential pitfalls.
Corporate retirement planning lays out the clients’ goals and objectives and formulates the strategy on how to achieve them. It helps businesses uncover different ways of improving their investment and profitability through better decision-making.
A strong corporate retirement plan consists of five key elements:
  • An executive summary.
  • The client’s description.
  • Vision, mission, and value statement.
  • Analysis of external and internal environments.
  • SWOT analysis of the company.
Although corporate retirement planning and strategic planning are interrelated, they also have major differences. Strategic planning involves the entire company, while corporate retirement planning involves the specific plans implemented by businesses to increase retirement savings.
Corporate retirement planning is necessary for businesses, agencies, and companies looking to help employees earn high savings for future use after retirement. Individuals nearing retirement need corporate retirement planning to gain a clear knowledge of saving strategies and the potential benefits and costs before making financial decisions.
Corporate retirement planning is performed by financial advisers, corporate planners, senior managers, and executive project managers.
A corporate plan should look as far as into the future of the business. Most companies prefer implementing a corporate plan that covers three to five years before review. This period allows businesses to identify areas of weakness and strength before deciding to develop a new plan.
The frequency of reviewing a corporate retirement plan varies depending on the reason for the review:
  • A monthly review aims to check the progress of the business and the key themes.
  • A quarterly review checks the progress of the whole corporate retirement planning details.
  • Annual reviews check whether the business is progressing according to the plan and if there is a need for change.
If employees’ pension plan is funded by the employer, the retirement income is taxable. Both individual income from earned incomes and retirement plans are taxed as ordinary income at a rate of 10 to 37%.