Myths About Small Business Retirement Plans, and Why You Need One

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Submitted by Life, Inc. Retirement Services on June 28th,2018

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If you are a small business owner, there are a lot of myths people may have told you about small business retirement plans. Don't listen to them. Here are a number of the myths you may have heard and some of the reasons you need a retirement plan, including tax benefits. 

Have You Heard That a Small Business Retirement Plan is Too Expensive to Establish and Manage? 

Nothing could be further from the truth, even though many small business owners don't have a plan for just this reason. Years ago this used to be true, but it's not anymore. For example, a small business with ten employees might be able to start a plan for a few hundred dollars with minimal costs to manage it monthly. Digital technology makes it far less costly. Companies that work with small business to establish individual plans make it simpler and less costly. 

In addition, tax benefits can offset even the minimal costs a small business owner does incur in establishing a plan. Owners can deduct administrative fees, 401k expenses and contributions. Tax incentives can be as high as $500 a year for three years for businesses. 

Have You Heard That a 401k Plan is Complicated and Confusing? 

Many small business owners think anything that involves government regulations has to be confusing. Actually, employers only have to make simple decisions involving plan designs. This is because small business investment experts have made the process much simpler, and digital technology helps. Sometimes, a plan can be established over lunch. 

Do You Believe That Your Employees Aren't Interested in a 401k Plan or Can't Afford to Contribute? 

A survey by in 2015 showed that  79% of employees would prefer additional benefits to a raise. Specifically, 31% said they would rather have a retirement plan to additional pay. In addition, the Federal Reserve has reported that one-third of Americans have no savings for retirement. 

As to affording to contribute, $1.64 per day, about the cost of a cup of coffee, contributed to a 401k plan would equal $18,000 over 30 years, without interest, and more than $60,000, assuming a return on investment of seven percent. 

Some Believe a Certain Small Business is Too Small for a 401k

There is no such thing as a company that is too small to invest in a 401k plan. Even if you are self-employed, a plan would benefit you, as it would not matter how many or few employees you have, or if you have a sole proprietorship. You just need a desire to have a plan. You could start with a small plan and let it grow with your company. 

No Matter What You've Heard, a Plan Isn't Complicated to Establish and Maintain

You also don't need to be an investing expert to have a plan. If you use a reputable provider, there will not be any great administrative burden in providing retirement offerings at all. An expert can help design an individual plan that will fit your business, as well as plan everything through the integration of payroll and retirement systems.

Retirement offerings are a must in today's society. Using a provider you trust is the key to starting a 401k plan. 

Do You Wrongly Believe Matching is Required? 

Matching an employee's contributions are not required with a 401k plan, but you have the option to add matching whenever you want to. If you do, not only will it maximize your personal contributions as an employer, but your matching contributions are usually tax deductible.

No Matter What You've Heard, You Won't Have To Take On Fiduciary Responsibilities 

While at one time financial advisors would put the responsibility for choosing the right plan on the business owner, and would just give an owner a list of funds to choose from, this is no longer true. 

Now providers share the risks with you and make the process easy.

Providers know business owners don't want to take on risks and don't have the time to decide where to invest the money. An investment team will determine an investment roster, monitor funds, and replace ones that  need to be with better ones. An owner won't have to think about this. 

It doesn't matter whether you have plans to hire employees for your small business, have current employees, or are a sole proprietor, you need a company 401k plan. Life, Inc Retirement Services works with small business owners to help establish an individual 401k solution for each client that will meet his needs and the needs of his employees. Call us today at 614-396-7652 for more information. 


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