One of the best ways to make your employees happy and less likely to leave your company and take another job may be to offer a small business retirement plan. In fact, nearly half of American families have no retirement savings account, even though the average retirement savings of American families is $95,776. That number can be deceptive because the median amount of savings for families is just $5,000--hardly enough for a healthy retirement. That counts those with savings and those without. The median amount for those with savings is $60,000. It's no wonder many American employees surveyed have said they would leave their job that has no retirement plan if they had a chance take one with a good plan. Other reasons to offer a plan include the tax savings for business owners and retirement advantages for them.
Employees Want a Retirement Plan at Work
A survey by glassdoor.com in 2015 showed 31% of those surveyed would rather have a retirement plan than additional pay. In addition, 79% of employees would prefer additional benefits to a raise.
The survey reported that with an expanding American economy that includes strong job growth "there is no doubt it is a job seeker's market. This is a clear signal to employers that in order to compete in today's labor market, it's not just about salary and compensation, employers should be communicating clearly about non-traditional compensation."
In other words, according to the survey, if you want to attract strong new talent and keep current employees, you might have to do such things as having a retirement plan, offer strong healthcare insurance, a good vacation, paid sick days, and performance bonuses. Adding a retirement plan is one of the easiest things to do to attract talent and retain current employees. When surveyed on what their biggest financial regret is, 46% of Americans said not saving enough.
Another Advantage of a Retirement Plan: You Will Save Money on Taxes
You can receive a special $500 tax credit for the first three years of a new 401(k) plan. As if that is not enough, you will receive tax deductions for your contributions to the plan. You can even save on your personal taxes if you contribute personally to the plan.
The cost of starting a 401(k) plan depends on a number of factors, but can be as little as $1,000. When you consider the taxes you can save by contributing to the plan, your savings can outweigh your costs.
Your Employees Will Save on Their Taxes
Any money they contribute will grow tax-free. This is because their contributions are deducted from their checks before federal and state taxes are withheld. Their taxable income is lessened, as is their tax burden.
Your Employees Tax Burden Will be Lessened During Retirement
After your workers retire and then withdraw the money in their 60s, 70s and beyond, they will probably be in a lower tax bracket than they were during their employment years. They will pay less tax than when they were employed.
You can see that a small business retirement plan benefits employers and employees.
It Isn't Complicated To Start or Manage a Small Business Retirement Plan
There are a lot of myths about starting a small business retirement plan when the truth is any small business can benefit from offering one to employees:
- One myth is a plan is expensive to establish and manage. While this used to be true, a small business with ten employees can start a plan for a few hundred dollars and have minimal costs to manage it monthly. One reason is digital technology makes having a plan cheaper than it used to be, and companies that work with small businesses to establish plans make it simpler.
- Some wrongly believe a small business retirement plan is complicated and confusing. Actually, small business experts make the process simpler, as well as digital technology. Employers have to only make simple decisions about plan designs, and a plan can often be established over lunch.
- No matter what you've heard, you won't have to manage the plan yourself. If you use a reputable provider, that company can streamline the process for you.
- You won't have to match an employee's contributions, even if you think you do. If you do, however, you will save on your taxes.
- If you wrongly believe only your employees can benefit from a plan, think again. As an owner, you can contribute as much as $18,000 annually, or $24,000 if you are 50 or older for your own retirement. You can also make a profit sharing contribution.