#1 Attract and Retain Best Employees
Many employees expect a 401(k) retirement plan to be a part of their employer's benefits package. According to PLANADVISER managazine, nearly 40% of employees said they would leave their current job for one that offers a 401(k) plan. If you are trying to hire an exceptional employee, you could be at a disadvantage if you do not have a retirement plan but your competitor does. In turn, you may need to increase the salary offer in order to compete.
Offering a strong 401(k) plan can also lead to happier employees, reduce employee turnover, and help your business to be more profitable.
#2 Tax Advantages of Retirement Accounts
There are several tax incentives for business owners who offer a 401(k) plan.
- You might be eligible for an annual $500 tax credit for the first 3 years of your plan that can be used to offset startup costs.
- If your company offers to match what your employee contributes to the plan, matching contributions are tax-deductible (limits apply.)
#3 Benefits Business Owners
As employees, owners of a business also benefit by socking away pre-tax dollars into a retirement plan because your money grows tax-free. According to the IRS, you can contribute up to $18,500 of your compensation for 2018, and an additional $6,000 if you are 50 or older. By investing in your own plan, you may save on personal taxes too.
#4 Technology Makes It Easier
You want to spend your time on your business, not become beholden to your 401(k). Whether you have an HR department or not, technology and outsourcing are making the ongoing management of a 401(k) plan easier than before. Hiring the right plan administrator, recordkeeper, and advisor make it possible to offer a cost-effective plan with a wide range of investment options. Additionally, 401(k) plan providers often offer data integration with your payroll company that reduces administrative work.
#5 Employee Retirement Readiness Saves Money
By offering your employees a retirement plan, ideally accompanied by education and advice, employees increase their chances of being retirement ready. When your employees are financially able to retire when they want to rather than being forced to work beyond traditional retirement age, the cost savings to your business in the form of reduced health care costs and other expenses can be significant.
Offering a 401(k) for a small business does not have to be difficult. Download out our checklist that helps you know what to look for when hiring a 401(k) Advisor or contact us. We're happy to chat and point you in the right direction.
Are your employees asking for an employee sponsored retirement plan? What is holding you back?