Here’s Why Even Your Small Business Needs A 401(k) Plan
When you started your small business, did you have your own retirement in mind? Too many small-business owners don’t go into business with their eye toward their retirement but they should. No one plans to work forever; even the boss will want to retire one day. For this reason, among others, offering a 401(k) as a small-business owner is a basic no-brainer.
Not big enough
Too many small-business owners think that because they only have a few employees, the company is too small. A 401(k) small business has an advantage over its competitors: offering a retirement savings plan is a magnet for the best employees. Do a bit of research on investing topics and you’ll find that the tax savings make it a profitable decision to add a 401(k) even if you only have three or four employees who participate in the plan.
Starting a 401(k)
There are a few preparations you should make before starting a 401(k) plan for your small business. You’ll need to find a vendor you trust to set up the plan for you. Setting up a 401(k) for your business can be tedious so be sure you choose a vendor with experience. Your vendor should handle much of the complicated details that go with a retirement savings plan.
Be sure you do your own independent research on your investment options. There will be different types of investment options offered, so be sure you know what you want to accomplish before you settle on a provider.
Don’t just educate yourself about the 401(k); educate your employees as well. Set aside time to familiarize your employees with the program you’re offering and help them get signed up. If you’re able to effectively communicate to your employees about the advantages of participation in your retirement savings plan, they’ll feel more secure and confident in making the investments for their future.
What’s in it for you?
Offering a 401(k) for your employees also gets you some write-offs on your taxes if you are offering a company match on employee contributions. Thus, a benefit that attracts you the top employees also benefits you on your taxes.
As the owner of your business, you’re probably taking a salary every year. There is probably a significant amount of your overall net worth wrapped up in your business. That’s the gamble all small-business owners are willing to take.
With a 401(k) set up for your employees, you can get the benefits of it as well. This can include tax-free contributions. In the unlikely event that your business fails to thrive, your 401(k) can provide a reduction in your overall financial risk.
The end game
The reality of the business world is that it is a never-ending competition. If you’re offering a 401(k), you’ll be attracting the top prospects from the limited pool of exceptionally qualified potential employees. Not only will your employees be saving toward their retirements, you’ll be building your own nest egg to see you through your golden years.