The top 5 benefits of a Deferred Profit Sharing Plan (DPSP)
A Deferred Profit Sharing Plan (DPSP) is a type of retirement savings plan that is offered by some employers.
It is similar to a traditional pension plan in that it provides employees with a source of income during retirement, but it is funded by contributions from the employer rather than the employee. Here are the top five benefits of a DPSP:
Employer contributions: One of the biggest benefits of a DPSP is that the employer makes contributions to the plan on behalf of the employee. This can provide a significant source of retirement savings, especially for employees who may not be able to save as much on their own.
Tax advantages: Contributions to a DPSP are tax-deductible for the employer, and the earnings on the investments within the plan are tax-deferred. This means that the money in the plan can grow without being subject to annual taxes, which can help it grow faster.
Flexibility: Unlike a traditional pension plan, a DPSP is flexible and allows employees to choose how their contributions are invested. This means that employees can tailor their investments to their own risk tolerance and retirement goals.
Portability: Another benefit of a DPSP is that it is portable. If an employee leaves their job, they can take their DPSP with them and continue to contribute to it or roll it over into another retirement savings plan.
Optional participation: Finally, participation in a DPSP is optional. This means that employees can choose whether or not to participate in the plan, which can be beneficial for those who may not be able to afford the contributions or who have other retirement savings options available to them.
Overall, a DPSP can be a valuable retirement savings tool for both employees and employers.
With employer contributions, tax advantages, flexibility, portability, and optional participation, a DPSP can provide a significant source of retirement income and help employees reach their retirement goals.