Since 1978, employers have offered a 401(k) as a savings vehicle to help employees and business owners save for retirement. This plan offers unique short and long-term tax advantages for both parties.
Customize a simple, affordable retirement plan for your small business in just a few clicks.
Employees enjoy:
401(k) contributions are deducted from employees’ taxable income for the year 2023, to a maximum of $22,500 for those under 50 and $30,000 for those age 50 and older. So, if you make $100,000 this year and contribute the maximum $30,000, you will owe taxes on $70,000. If your tax rate is 25%, the $30,000 you put into the plan means $7,500 less in federal taxes paid. You save that $30,000 for retirement, but it only costs you $22,500, assuming you chose traditional pre-tax contributions.
If you expect to be in a higher tax bracket in retirement, you may opt for Roth 401(k) contributions where you don’t reduce your earned income by the contribution amount, but all funds grow tax-free and no tax is owed when you take the money out in retirement.
Employers enjoy:
Employers can write off $250 per Non-Highly Compensated Employee enrolled in the plan – for a savings of $500 to $5,000 per year, over three years (up to $15,000 total).
Employers who choose auto-enrollment can write off $500/year for the first three years ($1,500 total). This credit applies to employers who convert an existing 401(k) plan to automatic enrollment.
A business owner can deduct up to $66,000 from taxable income per year when the maximum $22,500 is reached, along with a 25% profit-sharing contribution. The amount can be doubled if the business owner’s spouse also contributes to the plan.
The business owner can deduct all employer match or Safe Harbor contributions made to the plan from the business income for the year.
For employers, offering a 401(k) with matching contributions is a generous benefit for current and prospective employees that reduces recruiting costs, cuts employee turnover, and improves productivity. For employees, a 401(k) match is free money that grows a retirement nest egg exponentially year over year.
To learn more about the 401(k) plans offered to small businesses, contact Ubiquity today.
If you are a small business owner and need a retirement plan for yourself and your company, only Ubiquity offers flat-fee plans, plus expert guidance along the way.
We will fully customize your plan to meet the specific needs of your small business.
Setting up a 401(k) can be complicated. Only Ubiquity gives small business owners access to retirement experts in addition to industry-leading low flat-fees. Each sales expert has over a decade of experience assisting business owners in 401(k) plan design. Take advantage of this free benefit.
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44 Montgomery Street, Suite 300
San Francisco, CA 94104
© 2023 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 300
San Francisco, CA 94104