Here Are Seven Reasons All Small Businesses Need 401(k) Plans

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Retirement Services & Financial Advisors​ - Serving Columbus & Beyond

Submitted by Life, Inc. Retirement Services on April 5th,2018

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If you own a small business, you want it to be successful. Naturally, you need good employees to work for you to make that happen. To attract the best talent for your company, you need to provide more than just good salaries and bonuses. It is critical that you also offer a 401(k)-retirement plan, if you want the best potential employees to consider your company, rather than  a competitor. 

If you want to establish or rework a 401(k) plan, you need to know all the regulations and how they are being changed and tweaked by lawmakers.  A professional dedicated to your business needs to handle the 401(k) administration and the structure of your plan. Here are seven reasons you need to establish a 401(k) plan for your business. 

1. Many Employees Prefer a 401(k) to a Raise

A survey by Glassdoor in 2015 showed that 79 percent of employees would prefer additional benefits to a raise. While there were other benefits  mentioned, such as health insurance, vacation time, and performance bonuses, 31 percent said they would rather have a retirement plan than additional pay. Your employees want you to offer them a small business 401(k). A 401(K) advisor can make it happen for your company. 

2. Small Business Retirement Plans Are a Great Way to Attract New Employees 

Previously most employees could depend on a certain amount of money when they retired through their company's pension plans. Today, retirement plans are rare. Those seeking a career, know the benefits of joining a company that offers a 401(k) plan and choose the companies that offer a retirement plan, rather than those that don't. 

3. Retirement Plans Can Help Reduce Turnover

Almost 40 percent of current employees working for a small business, say they would leave their current job, if they could find would that offers a retirement plan. Offering a small business 401(k) plan shows you want to be competitive as a business and that you care about your employees. 

4. With the Help of a 401(k) Advisor, Establishing a Small Business 401(k) Plan Isn't Hard

Today's 401(k) plans are web-based. That makes them simple for a small business owner to establish, maintain, and administer, with the help of a 401(k) advisor. Setting it up requires a minimal time commitment with little to no paperwork involved. Employees will be able to access their accounts 24 hours a day, and a retirement specialist will be just a phone call away.

5. Your Employees Won't Be Taxed Until They Take a Distribution--Making Your 401(K) More Enticing

Although your employees will receive earnings on their 401(k) investment during most tax years, they won't pay taxes on it until they withdraw it.  They will find it rewarding to see their account grow--tax free. Even when they start making withdrawals after 59 1/2, they will only pay taxes on funds, not the more costly capital gains taxes.

These rules make it possible for small businesses to offer a retirement plan that can compete with large corporations, and business owners have until October 1 to establish a plan and receive a tax credit.

6. Having a 401(k) For Your Employees Can Also Be Beneficial For Your Own Retirement

Small business owners work hard to make their companies successful. Often they hope the value of their business will provide their own retirement plan. What if they don't find a buyer for their business, however? Was all the work for nothing?

On the other hand, a 401(k) plan will allow the owner to contribute as much as $18,500 annually, or $24,500 if he or she is 50 or older. An owner can also make a profit sharing contribution.  

7. A Retirement Plan Will Help You Save on Taxes

Your business might receive a special $500 tax credit for the first three years of a new 401k plan. In addition, you can receive tax deductions for your contributions to the plan. You could also save on your personal taxes if you contribute personally to the plan.

Learn More Today

Do you own a small business? Are you thinking about starting a 401(k)-retirement savings plan for your employees? According to Investopedia, only 40 percent of small business owners have contacted an advisor. Don't try to go it alone. To make an informed decision, contact us today.