Most people realize that, in the 21st century, we all have to accept more responsibility for saving for our own retirement. According to a Wells Fargo/Gallup Small Business Index survey, nearly 50 percent of small-business owners are concerned that they won’t have enough money to retire. And what about our employees? They’re going to need nest eggs, too. Offering to help create them can benefit a small business in more ways than one.
Here are six practical reasons your small businesses should consider offering a 401(k) plan.
- 401(k) plans are a recruiting magnet. In the past, employees were guaranteed at least a certain amount of income through pension plans offered by employers. These days, pension plans are becoming rare, and employees are realizing the benefits of joining a company that offers a 401(k) plan. If an employee has the choice between two equally appealing job offers and one company offers a 401(k) plan, it’s likely to sway their decision. In other words, 401(k) plans are a must-have benefit that will help attract top talent to your small business.
- 401(k) plans help reduce employee turnover. Nearly 40 percent of small-business employees say they would leave their current job for one that provides a 401(k), Plan Adviser magazine reports, and retirement plans are among one of the top 10 reasons why employees chose their employer, according to a recent AARP survey. Offering a 401(k) plan not only shows that you care about your employees, but also helps you be more competitive in the marketplace. Retaining employees means that you’ll spend less money on recruiting and training new ones.
- 401(k) plans help save on small-business taxes. Your business might be eligible for a special $500 tax credit for the first three years of your 401(k) plan. If the $500 tax credit for starting up a 401(k) plan isn’t convincing enough, then the tax deductions for employer contributions should be. As an added bonus, you, by investing in your own plan, can save on your personal taxes, too.
- 401(k) plans are simple to set up and maintain. Today’s web-based small-business 401(k) plans are designed to be easy for the small-business owner to set up, administer, and maintain. With online setup and management, plan administration requires a minimal time commitment — and little or no paperwork. Employees have 24/7 access to their online 401(k) accounts, and a retirement specialist is just a phone call away.
- 401(k) plans help small-business owners support their own retirement. Too many small-business owners focus solely on the success of their business while shortchanging their own personal retirement security. A 401(k) plan makes sense regardless of how long you’ve been in business. Even if you decide to start up another company, you can simply roll over your 401(k) balance to a new account.
- 401(k) plans contribute to the economy. When small-business owners equip employees with the tools necessary to retire comfortably, they contribute to building a healthy economy — and a society of people with more disposable income.