0521 Publ 4118 (PDF)

Official source: IRS Forms, Instructions & Publications (https://www.irs.gov/pub/irs-pdf/p4118.pdf), retrieved 2026-10-03. U.S. Government work (17 U.S.C. § 105).

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employers and employees. It addresses the initial steps when you’re thinking about a retirement plan, and then covers the working stages of a plan — choosing, establishing, and operating. And finally, it includes resources and contacts for further assistance with a retirement plan.

The Internal Revenue Service offers information for employers and

*assuming 10% annual earnings compounded monthly

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saving $300 each month.

She chose diversified investments in her employer’s plan that on average earned 10% per year.

April got married, started a family and decided to stay home after working for 10 years. April had contributed $36,000 to her retirement fund while working and didn’t contribute another penny. Because of

compounding, when April turned 65, she had over two million dollars in her retirement account.

The chart below shows the comparison of savings for June and April. June would have had to contribute much more out-of-pocket for her money to have grown to a million dollars. Her contributions had less time to grow, or compound.

*$300 a month times number of years

Remember, April contributed $36,000 in the 10 years she was employed. All subsequent year earnings are based on her initial contributions of $36,000.

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• flexible plan options are available, and

  • a retirement plan can attract and may help retain employees, thus reducing new employee

training costs.

Employee benefits include:

• tax on employee contributions is deferred until distributed (except for Roth contributions),

• investment gains in a plan are not taxed until distributed (gains on Roth contributions are

excluded),

• retirement assets can be carried from one employer to another,

• contributions can be made easily through payroll deductions,

• Saver’s Credit is available to those who qualify, and

• better financial security is available at retirement.

Start by contacting either a tax professional familiar with retirement plans or a financial institution that offers retirement plans.

See the last page for other websites and telephone numbers to access IRS retirement plan reading materials or to get answers to your retirement plan tax-related questions. You can access detailed information on retirement plans at www.irs.gov/retirement.

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Every retirement plan has three key stages — choosing, establishing, and operating the plan.

Choosing – Decide to invest in your future. Begin thinking about your retirement needs, and then learn specifically about ways you can put money aside for your retirement and the retirement of your employees.

Establishing – Take the necessary steps to put your retirement plan in place. The administrative steps to set up the plan may vary, depending on the type of plan you choose. Examples include:

• arranging a fund for the plan’s assets,

• adopting a written plan,

• notifying eligible employees, and

• developing a recordkeeping system for your plan.

Operating – Apply the terms of your retirement plan so it grows and evolves into the valuable retirement vehicle you need. There are several steps you’ll need to take to operate the plan on an ongoing basis, depending on the type of plan you choose. Examples include:

• covering eligible employees,

• making appropriate contributions,

• keeping the plan up-to-date with the retirement plan law,

• managing the plan assets,

• providing information to employees participating in the plan, and

• distributing appropriate benefits.

Check out IRS Publication 3998, Choosing a Retirement Solution for Your Small Business, which displays a chart of retirement plan products to help you choose, establish, and operate a plan that’s right for you and your employees.

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• www.irs.gov/retirement

  • 877-829-5500: Employee Plans Customer Account Services

• Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)

  • Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)

  • Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)

  • Publication 3998, Choosing a Retirement Solution for Your Small Business (Español)

  • Publication 4222, 401(k) Plans for Small Businesses

  • Publication 4333, SEP Retirement Plans for Small Businesses

  • Publication 4334, SIMPLE IRA Plans for Small Businesses

  • Publication 4587, Payroll Deduction IRAs for Small Businesses

  • Publication 4674, Automatic Enrollment 401(k) Plans for Small Businesses

  • Publication 4806, Profit Sharing Plans for Small Businesses

Publication 4118 is also available in other languages on our forms and publications page.

For general taxpayer assistance, contact the IRS at

800-829-1040

Publication 4118 (Rev. 5-2021) Catalog Number 35198N Department of the Treasury Internal Revenue Service www.irs.gov