Small businesses of all sizes and ages have compelling reasons to consider creating retirement plans:
Bigger Returns
Pre-tax contributions lower your taxable income, making it easier to invest more. In addition, the tax-deferred growth model means your money compounds and grows over the holding period as compared to a taxable account. Though you will have to pay taxes on the money when you retire, you will likely qualify for a lower tax bracket, which means that you will only pay taxes on the amount you withdraw.
A Path to Retirement
Too many small business owners have no retirement savings plan for themselves. Many worry that they do not earn enough profit to save for the future or that they need all the income they generate to grow their business. Some entrepreneurs are simply planning to work until they die, seeing no desire or need to save for future retirement.
These ideas are noble and common among small business owners. However, they are just not realistic. You may love your work today, but too many variables are beyond your control. What if you get sick? What if your spouse becomes sick and you must become a caretaker? What if your business model becomes outdated or you change and one day actually want to retire? You better have a plan.
Sure we’ve all heard that work can keep our minds sharp and give us a sense of purpose heading into old age, but at least one analysis found that seven years of retirement can reduce your chance of getting a serious condition such as heart disease or diabetes by 20 percent. Remember, choosing not to retire is much different than not having the option if circumstances demanded it.
A Valuable Incentive
Retirement benefits can help attract top talent, retain engaged employees, and help your company thrive. By offering this highly valuable incentive, your enterprise stands to gain the top talent that you might otherwise lose to your competitors. The 401(k) is second only to healthcare in terms of perceived value. In fact, the vast majority of workers would rather have access to a retirement benefit than a pay raise. According to the Employee Benefit Research Institute, more than half of U.S. workers say they are satisfied with their current job largely due mainly in part to its benefits package. Happy employees mean productive employees, and nothing is more beneficial to any business’ bottom line than positive productivity!
