Profit-Sharing Retirement Plan Basics

A Kings Park, New York resident, Bryon Martinsen graduated from St. Joseph’s University, where he earned a bachelor of science in management and marketing. Bryon Martinsen serves as a branch manager with Centaurus Financial Inc. At the firm, he helps clients with retirement plans such as profit-sharing.

In a profit-sharing retirement plan, an employee receives a share of the company’s profits. Depending on their work and the company’s success, profit-sharing plans may be the right choice for certain talented employees that want to improve the firm and therefore their income. Unlike other types of retirement plans, employees cannot contribute to it themselves, as it solely relies on the company and employer.

The company and employer decide how much they want to allocate to each employee, and since the plan relies entirely on the company’s success, there may be years in which employees won’t receive anything if the company does not perform well. The IRS limits the maximum amount of money an employee can receive per year with this retirement plan to $58,000 if they are under 50, and $64,500 if they are over 50.