You'd like to offer some type of retirement plan. You've looked at several options including a 401(k) plan. You just aren't sure which option to choose. Have you considered a payroll deduction IRA or a Simple IRA?
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Most business startups are focused on selling their products or services. That's understandable. If you're not selling, you're not generating revenue, and without reliable cash flow, your company struggles to survive. But not too long after launching a business, you're looking at hiring your first employees. You want to make sure you get the right employees from the beginning. Employee turnover is a costly proposition, especially for a fledgling business. It is estimated that it costs 2.5 times a person's salary to replace a lost employee. That's as much as $75,000 for an employee making $30,000 per year.
One of the challenges a small business owner faces is finding the right retirement plan. While some may feel a 401(k) is too cumbersome, there are reasons why a 401(k) is often the best option, even if your business is very small. However, before deciding on the right plan, it is crucial to carefully evaluate plans as well as the current, and future impact on your business.
Factors to Consider When Selecting a Plan
One of the first factors is the size of the company. A sole proprietor and a company with employees may require different types of retirement plans, although both may opt for a 401(k) plan. Here are some of the issues to be considered when considering a plan:
- Size of Business – while a sole proprietor may wish to consider a different plan, one reason to consider a 401(k) is to account for future growth. Having an existing 401(k) plan in place means you have a valuable recruiting tool when you start expanding your staff.
- Ease of Enrollment – thanks to lesser rules which apply to small businesses, a 401(k) plan can have provisions to automatically enroll new employees. This means less administrative burden on your company and less concern about compliance matters.
- Flexibility of Investments – one of the most important factors to be considered is the breadth of investment options. This is particularly true if you have employees in different age groups. A younger employee may be willing to take more significant risks with their 401(k) investments while an older employee may prefer a more stable investment. This is important to determine ahead of time, particularly since a company who has a lower retention problem will likely need a broad base of investment options.
- Administrative Burden – the last thing a small business owner needs is additional paperwork. When searching for a plan, it is important to determine ahead of time the amount of time you will be required to dedicate to dealing with plan paperwork. Having the right company working on your 401(k) plan will ensure the burden of administering the plan will be handled by the outside company.
- Fees Involved in Plan – a big factor in determining the suitability of a 401(k) plan for your small business is the fees for the plan. While the IRS allows most small businesses to deduct a portion of the fees for the initial setup, there are ongoing management fees which must be considered.
Working with the Right 401(k) Administrator
Once a business owner, or manager has an opportunity to carefully evaluate their options for a 401(k) plan, they must find the right administrator for the plan. This means thoroughly reviewing their qualifications, the level of service they are providing, and the quality of the plans offered.
In addition to offering customized solution to your plan needs, the right plan administrator should also be addressing the required paperwork. These filings are required under ERISA Title I and Title IV as well as the Internal Revenue Service (IRS).
Another factor when considering a small business 401(k) plan is the administrator's experience in dealing with small business plans. While many plan administrators are well-versed in dealing with plans for a large company, many do not have the experience to deal with small business 401(k) plans.
When you need a customized retirement plan solution for your business, consider the benefits of working with Life, Inc. Retirement Services. We bring a unique perspective because our focus is on small business needs. Your need a plan administrator who will work with you to customize a 401(k) plan that fits your needs and meets your company objectives. Contact us today at 614-396-7652 or by Email at email@example.com for a free consultation and let us help you design the right 401(k) plan for your business.
Millennials don't save money.
As a small business owner or operator, you may think having a 401(k) plan is too costly and confusing. What you may not be aware of is that a 401(k) plan can be designed to fit your needs and there are tax benefits offered to small businesses who participate in these plans.
Everyone wants to retire at some point or another. Some want to retire sooner rather than later. As such, it's important to consider 401k for business owners. If you're a small business, you want to think about how you can retire when you're ready. Additionally, you want to be able to attract top talent – and that means offering them the best 401k providers, too.
With the average Social Security check just $1,404 per month in 2018, starting a small business 401(k) retirement plan is a great way to help your employees secure their financial future. It also increases employee loyalty by demonstrating that you care about your worker's financial well being. Another big benefit is that a small company 401(k) offers tax advantages for both you and your employees.
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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.
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Employees like 401k retirement plans, so much so that they represent the kind of benefit which can help small business owners attract new workers. That said, more than 70% of small businesses don't offer these plans. Why are these plans so popular, and why are so many small companies reticent to offer them?
With people living longer than they used to, it is more important than ever that people start saving for retirement as early as possible. However, many people who work at small businesses do not have access to a 401k plan, as only 15% of businesses with 100 employees or less offer their employees retirement plans, and only 50% of Americans overall have access to a workplace retirement plan. Generally, small business owners do not want to offer a 401k plan due to the time and money they would have to invest to offer these benefits. While this is a valid concern, the fact is that the pros outweigh the cons of offering your employees a 401k plan. Here are just a few of the benefits you could gain by offering a 401k plan to your employees.