401(k)s for Small Businesses

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• 3 minute read
401ks for small business

401(k) for small businesses are often only seen as a large cost – a fear that is not entirely unfounded. Historically, traditional providers catered their products, as well as their pricing, toward larger companies with bigger budgets and more assets. And, even if a smaller company could afford the financial piece, the sheer overhead of administering a plan was too much to take on.

Luckily, the days when plans were prohibitively expensive are over. By automating administration, providers are able to keep costs down to about half that of a traditional provider, and far less than a single employee’s health insurance! Now more than ever, the benefits of offering a 401(k) far outweigh the costs, especially because the costs are coming down drastically. It serves not only as an incredible employee benefit, but also comes with special tax incentives that small business owners can get from offering retirement plans to their employees.

Technology is making retirement saving easier than ever. Companies like Human Interest reduce the time burden and keep costs low by focusing on administrative efficiency. Managing investment accounts requires not only financial insight, but also a system for managing the funds, keeping up to date on legal requirements, withdrawing the money each pay period, and a process for employees to access their accounts to help you and your employees make sound financial choices for your retirement.

Additionally, retirement plans are also a great way to recruit and retain employees to help drive success. Giving employees amazing benefits is one of the best way to ensure they’re happy, remain loyal to your company, and want to help you make it succeed. In fact, according to a recent Forbes article, having happy employees contributes to higher profits, as much as 22.2% as shown in data from the Fortune 100 Best Companies to Work For. So, since many employees cite retirement options as one of the primary benefits they seek when deciding where to work, offering it to them can contribute to higher work satisfaction, help you reduce turnover, and even help your business make more money.

Moreover, 401(k)s can be a great way to diversify. You never know what will happen or when your business will struggle. It’s important for business owners themselves to save money by starting a company-sponsored retirement plan for themselves and their employees. That way, everyone’s hard work is rewarded because everyone can prioritize their retirement savings throughout their working lives. Retirement savings are meant for the future, so even if you experience variable income or business troubles, retirement accounts remain solid as long as they aren’t touched.

And let’s not forget about all the money you and your employees save and gain on tax-sheltered investments until retirement. The money your employees put into savings before taxes are taken out of their paychecks. Then, when they retire and start withdrawing money from their 401(k)s to live on, they will be taxed at an income tax rate versus a capital gains tax rate, which is far better.

The best bonus for businesses, though, is that they can get a tax deduction for contributions to their employees’ retirement accounts. Want to be extra generous? Set up a top-notch 401(k) plan by giving employees a match and get a bigger tax deduction. If you match part of your employees’ contributions to their retirement plans, you get to deduct those contributions and help your employees grow their savings. Plus, since you are your own employee as well, this means that you can match your own contributions too.

Technology has reduced a lot of the tedious administrative work around starting a 401(k) and paperwork  along with it the overall cost of providing a retirement plan for your company.