Category: Personal Finance

Find important information on Personal Finance from the experts at Ubiquity Retirement & Savings. Get important news that can affect your personal finances, along with tips and advice from our team of financial experts. Call Ubiquity today for a Free Consultation at 855.466.5825.

It’s no secret that attracting and retaining top talent is crucial for the success of any small business. While offering competitive salaries is the baseline for keeping employees and prospective new hires happy, providing financial planning resources to employees is becoming more important than ever.

There are several ways to provide financial planning resources to employees. Some of the most popular methods include:

1. A small business 401(k) plan.

A 401(k) plan is a retirement savings plan that allows employees to contribute a portion of their income to a tax-advantaged investment account. To that end, a small business 401(k) plan is the same thing, but tailored to employers and employees at a small business.

Employers can also contribute to the plan on behalf of their employees. Offering a 401(k) plan is a valuable employee benefit–and a great way to help your employees save for retirement.

Answer a few simple questions to find the optimal plan for you and your small business.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

2. Health insurance plan options.

Health insurance is the single-most desired benefit employees want, and for significant financial reasons. Participation in a health insurance plan lifts a massive financial burden from individuals seeking medical attention for anything from serious illness to a sprained finger.

3. Health savings accounts (HSAs).

HSAs are tax-advantaged savings accounts that employees can use to pay for qualified medical expenses. HSAs are typically offered in conjunction with high-deductible health insurance plans and can help employees save money on healthcare expenses, while also encouraging them to be more engaged in their healthcare decisions.

4. Workplace life and disability insurance plans

The opportunity to participate in these types of insurance is highly valued by employees of all stripes. At typically very little cost to the employers, you can offer your employees peace of mind that they and their beneficiaries will be covered after an adverse event.

5. Financial education resources.

From improving financial literacy to making better financial decisions, financial wellness programs can include workshops, online resources, and one-on-one counseling sessions with financial advisors.

 

There are three easy steps to start implementing these financial wellness benefits at your company.

1. Understand your employees’ needs and preferences.

Conducting surveys or focus groups can help you identify what types of resources your employees are most interested in and their financial goals and challenges. It’s important to choose resources that are affordable, easy to use and provide value to your employees.

2. Optimize communication with employees.

Ensure your employees understand the benefits of the resources you offer and how to access them. Provide regular updates and encourage feedback to ensure the resources meet your employees’ needs.

3. Provide ongoing support and education.

Financial planning is an ongoing process, and supporting your employees is important. This can include regular workshops, one-on-one counseling sessions, or access to online resources, such as the Ubiquity blog, which is full of relevant articles designed to help savers increase their financial literacy.

 

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

So you’ve gotten a 401(k) plan set up for your small business. Now what? After taking the time to set up an effective plan for your employees, you need them to start using it! However, many employees aren’t motivated to contribute more (or sometimes at all) to their 401(k)s, which can be detrimental to both you and them.

These strategies will help you – and your employees – make the most of the benefits your small business offers.

Educate Your Employees About the Benefits of 401(k) Plan

First, ensure your employees understand the benefits of contributing to a 401(k) plan. Educating our employees about the benefits of the 401(k) plan, such as tax advantages and any matching contributions, is essential. Be sure to let them know how much they’ll save on taxes by contributing more to their 401(k) plans, and make it clear that their contributions are an investment in their future.

Answer a few simple questions to find the optimal plan for you and your small business.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

Offer an Employer Match

Want to benefit your employees (and make your small business stand out)? The easiest way to do that is by offering an employer match as part of your 401(k) plan. What this means is that you’ll make contributions to the employee’s 401(k) plan based on the amount the employee contributes. For example, if an employee contributes 3% of their salary to the 401(k) plan, you could match that contribution.

Not only will this make your employees feel more valued, it’ll also motivate them to contribute more to their 401(k)s.

Make the Enrollment Process Easy

The enrollment process for a 401(k) plan should be simple and straightforward. Make sure your employees understand how to enroll in the plan and how to make contributions. If the process is complicated, your employees may be discouraged from enrolling or contributing.

Offer Automatic Enrollment

Automatic enrollment is a great way to motivate employees to contribute more to their 401(k) plan. With automatic enrollment, you enroll your employees in the plan and set a default contribution amount. The employee can opt out of the plan, but most employees will remain enrolled. This can be a great way to increase participation in the plan.

Offer Financial Education

Offering financial education to your employees can help them understand the benefits of a 401(k) plan and how to manage their finances. Consider offering financial education seminars or one-on-one counseling sessions. The Ubiquity blog is a great online resource for timely, relevant retirement plan information and more.

Communicate Regularly

Communication is key, and this is no exception. Regularly update your employees on the benefits of your small business’s 401(k) plan, its performance, and how to enroll. Keep them informed about any changes to the plan or employer contributions.

Celebrate Success

When your employees contribute more to their 401(k) plan, celebrate their success (and we don’t just mean with a pizza party). Offering incentives for reaching certain savings milestones can also motivate your employees to continue to contribute more to their 401(k) plan.

 

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

If you’ve taken the time to set up a 401(k) for your small business’s employees, chances are you’re probably hoping they’ll enroll. After all, low participation rates can lead to a lack of retirement savings for your employees, as well as limiting the benefits that you can receive from offering a 401(k) plan. So how do you make enrollment happen? There are several ways that small business owners can encourage high participation rates in their 401(k) plans.

1. Consider the factors that impact participation rates…

Several factors can affect small business 401(k) plan participation rates, including plan complexity, high fees, limited investment options, and more. Lack of automatic enrollment and no employer match can also be a turn-off when it comes to employee participation.

2. …And then solve for them.

Show your employees you can give them the 401(k) plan they need. Choose a retirement plan that enables employees to save for retirement easily, the flexibility to make changes when necessary, and the educational resources they need to improve their financial literacy.

3. Make sure they understand the upside of a 401(k) plan.

A small business 401(k) plan greatly benefits all participants. After all, it allows them to save for retirement while potentially reducing their current tax liability. Employees can contribute up to $22,500 (or $30,000 if they are age 50 or older) in 2023 to their 401(k) plan–and you can make contributions on their behalf, too.

Bonus: You benefit, too. Offering a 401(k) plan helps attract and retain talented employees. And even better, your contributions are tax-deductible, too.

Answer a few simple questions to find the optimal plan for you and your small business.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

4. Simplify plan design.

Simplifying the plan design can make it easier for employees to understand and enroll in the plan. This can include providing clear explanations of plan provisions, clarifying investment options, offering automatic enrollment and auto-escalation, and more.

5. Increase employee communication.

You must communicate the benefits of the plan clearly and frequently to your employees for it to work. This includes explaining how the plan works, what the benefits are, and how to enroll. We like to use a variety of methods so everyone gets the information: email, newsletters, and meetings all work.

6. Offer employer matching contributions.

Implementing an employer match into your small business’s 401(k) offering can be a powerful incentive for employees to participate in the plan. You can choose to match a percentage of your employees’ contributions or make a fixed contribution.

7. Implement automatic enrollment.

This easy step can remove the barriers to entry that employees may face when trying to enroll in the plan. With automatic enrollment, employees are automatically enrolled in the plan unless they choose to opt out.

Thanks to Secure 2.0 legislation, most plans established by December 29, 2022 will be required to add automatic enrollment no later than January 1, 2025, so you might as well get ahead of the curve.

8. Provide financial education to encourage saving.

Encouraging employees to save by helping them understand the benefits of saving for retirement and how to manage their finances effectively. You can assist by offering education on 401(k) planning and encouraging your employees to increase their contributions–helping them achieve their goals and showing that you value their futures.

9. Offer incentives.

Prizes and recognition can be great ways to encourage participation in your small business’s 401(k) plan. Secure 2.0 legislation permits de minimis financial incentives, not paid for with plan assets, such as low-dollar gift cards, to boost employee participation in workplace retirement plans. You can incentivize things like enrollment, increasing contributions, reaching savings goals and more.

Need some help getting your employees to participate? Reach out to Ubiquity today at 866.634.6116.

 

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

 

As a small business owner, offering a 401(k) plan to your employees is a great way to attract and retain talent. However, simply having a 401(k) plan isn’t enough to win the loyalty of employees and the attention of prospective new hires.

In order to truly benefit your employees, you need to make sure that the plan is user-friendly. We’re breaking down our top tips for making your small business 401(k) plan easy to understand.

Provide clear and concise information about the plan.

It makes sense that one of the biggest barriers to participation in a 401(k) plan is a lack of understanding. Make sure that your employees have clear and concise information about the plan, including:

  • What a 401(k) plan is.
  • How your small business 401(k) plan works.
  • What the investment options are.
  • What the fees and expenses are.
  • How to enroll in the plan.
  • How to start contributing and make changes to contributions.
  • How to access their account.

This information should be provided in a way that is easily accessible. You may want to consider adding resources such as a dedicated 401(k) information section on your company website or intranet.

Answer a few simple questions to find the optimal plan for you and your small business.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

Offer investment education.

Investing can be overwhelming, especially for those who are new to it. Offer investment education to your employees to help them make informed decisions about their 401(k) contributions. This could include:

  • Holding informational sessions or webinars on investing.
  • Providing educational materials such as books or online resources. (Hint: the Ubiquity blog is a great resource!)
  • Offering consultations with a financial advisor or plan representative.
  • Creating a list of recommended investment options based on different risk tolerances and goals.

Remember: Employees who feel confident in their own knowledge about investing are more likely to participate in the plan.

Simplify the investment options.

Help your employees avoid decision paralysis by paring down the investment options your small business 401(k) offers. This will make it easier for your employees to make informed investment decisions, and help them feel more confident doing so.

Consider offering a limited number of investment options, specifically including pre-packaged portfolios that allow your employees to quickly and easily click into saving for retirement.

Automate enrollment and contributions.

You heard it here first: Automatic enrollment is awesome. By automating these employee contributions, you’re making it easier for your employees to participate in your 401(k) plan. Automatic enrollment will be mandatory for most plans in 2025 anyway, so get ahead of the curve now.

You can also offer automatic contribution increases, also known as auto-escalation. This is when the employees’ contribution rate increases annually. This can help employees save more for retirement without having to think about it.

Regularly review and update the plan.

A 401(k) plan is not a set-it-and-forget-it benefit for you or your employees. Regularly review and update the plan to ensure that it remains user-friendly and relevant to your employees’ needs. This could include:

  • Reviewing the investment options and updating them as needed.
  • Evaluating the fees and expenses (or switching to a provider with low, flat fees – like Ubiquity).
  • Gathering feedback from employees and making changes based on their suggestions.
  • Keeping up-to-date with regulatory changes and ensuring compliance with all applicable laws and regulations.

By regularly reviewing and updating the plan, you can ensure that it remains a valuable benefit to your employees–and to your small business.

 

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

Contact your plan sponsor right away if you think you have contributed too much to your 401(k) or you’ll be taxed twice (in the year you contributed, and in the year you withdrew)! If you’re under 59.5 years old, your distributions could also be subject to the 10% early distribution tax and 20% withholding.

Can you contribute too much to a 401(k)?

The IRS limits the amount you can put into a tax-advantaged 401(k) account. For 2023, that amount is $22,500 for individuals under 50 and $30,000 for those age 50 and older. The employer contributions do not count toward that limit but instead count toward an overall limit of 100% of your salary or $66,000 whichever is less.

Most plan participants never have to worry about over-contributing. The plan administrator tasked with account maintenance will likely keep you from putting too much money into the account each year.

However, you might run into a problem of over-contributing if:

  • You switch jobs during the year and start a new 401(k) plan.
  • You work multiple jobs with more than one 401(k).
  • You received a pay raise or bonus, which included automatic 401(k) deductions.

Answer a few simple questions to find the optimal plan for you and your small business.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

How to avoid a 401(k) over-contribution

Juggling multiple 401(k)s is challenging. Communicating with your employers and plan administrators to stay on top of the issue is the best way to stay on top of the situation before it ends up costing you big-time.

How to fix a 401(k) over-contribution

The IRS allows until April 15 of the following year to correct an over-contribution error. They recommend contacting your plan administrator to fix the problem by paying out the difference as an excess deferral. The plan administrator will pay you that amount by April 15, which counts as part of your gross income for the year in which it was contributed. The interest earned on the amount is taxed when the money is withdrawn.

Ideally, you will check your distributions in January or February and initiate any withdrawals by March 1, so you’re not left scrambling after the deadline. Should you notice the error after April 15, the excess contribution will be taxed twice – tax on the excess the year it was contributed to the 401(k) and tax on whatever amount is withdrawn from the retirement account.

How to contribute more toward your retirement

If you’re looking to maximize your retirement savings, you are allowed to have multiple accounts. If you reach the contribution limits of your 401(k), for example, you can open a high-deductible health spending account, as well as a tax-deductible or Roth IRA.

Contact Ubiquity

As a small business 401(k) plan provider, Ubiquity is responsive to the needs of employers and employees, including concerns about juggling multiple small business 401(k) plans or over-contributing. We provide employees with financial wellness tools to help you reach your goals.

As a small business owner, it’s imperative that you ensure your employees are prepared for retirement. After all, you care about them and their financial future. These helpful strategies will help ensure that your employees are ready for what comes next.

Why retirement planning is (extra) important for small business employees

Retirement planning is essential for everyone, but especially for employees of small businesses that may not have the deep pockets that a major corporation does—and the sooner they start saving, the better. Many small business employees may not have access to the same retirement benefits as those at larger companies, such as pension plans or stock options, which can make it harder to save.

Additionally, small business employees may be more vulnerable to financial shocks that may arise such as unexpected medical expenses or a job loss. Having a healthy retirement plan can help provide a safety net for these (and many other) unexpected expenses.

Most people significantly underestimate the amount of money they’ll need in retirement and may not save enough to be able to maintain their current lifestyle after retirement. By educating your employees on the importance of retirement planning, you can help them avoid this common pitfall. Future them will thank you.

Answer a few simple questions to find the optimal plan for you and your small business.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

3 biggest benefits of saving in a 401(k)

These are the top three most compelling reasons for your employees to participate in your small business 401(k) that they need to know now:

High contribution limits. One of the most important benefits of a 401(k) is how much money each individual is permitted to contribute each year. These limits are set by the IRS, and typically increase annually to keep up with inflation. The maximum contribution in 2023 is $22,500 for people under age 50. For those aged 50 and older, the total is $30,000.

Tax savings. Be aware that 401(k) plan contributions can be made with pre-tax dollars, so the more you contribute, the lower your annual taxable income. Even $1,000 contributed can be enough to lower your tax bracket and the percentage of your income paid to the IRS.

Compounding interest. Another big benefit offered by 401(k) plans is compounding interest. This is a saver’s best friend. When you invest in a 401(k), the money you add generates interest. Then the interest itself generates interest (compounding) and can grow rapidly year over year.

How to educate your small business employees on retirement planning

There are a number of ways that you can help your employees learn more and feel confident with their retirement planning:

1. Offer employer-sponsored retirement plans

One of the most effective ways to encourage retirement planning is to offer employer-sponsored retirement plans, such as 401(k)s. These plans allow your employees to contribute pre-tax dollars to a retirement account, which can help reduce their taxable income and increase their retirement savings. Bonus points for offering matching contributions.

2. Provide ongoing education and support

Retirement planning can be complex, and many people may not know where to start. Consider providing ongoing education and support to your employees, such as financial advisors or retirement planning workshops. This can help everyone feel more confident in their retirement planning.

There are lots of online tools you can share with employees – and use yourself– that help them with the logistics of retirement planning. One great tool is a paycheck calculator, which helps people determine how much they can afford to contribute from each paycheck.

There are also 401(k) calculators that can help participants figure out how much they can expect to save over their own expected time horizon. The information these calculators take into account includes age, income, current savings amount, expected age of retirement, probable rate of return, and more.

3. Create a culture of contribution

You can lead by example, provide education, and make it easy for your employees to set up their 401(k)s. By being open and clear about offerings and benefits, more employees are likely to use the investment options you present. You can even take it to the next level by making retirement planning and benefits information part of your small business’s onboarding process.

Sole proprietor 401(k). 401(k) for freelancers. Solo-K. No matter what you call it, if you’re self-employed and looking to save for retirement, a one-participant plan could be right for you.

For over 30 years, solo 401(k) plans have given small business owners with no employees the chance to save for the future while also providing tax credits, much like an employer-sponsored plan. The biggest benefit of having a solo 401(k) retirement plan is that you get all the savings power of a traditional 401(k) plus all the tax credits and loan options.

Maximum savings

Many freelancers and solopreneurs choose to open an IRA as their primary retirement savings vehicle, but that type of plan only permits you to put away $6,500 for the entire year in 2023, plus a catch up contribution of just $1,000 if you are age 50 or older.

That might not seem too shabby until you compare that with a 401(k) plan. With a solo 401(k) plan, you can save up to three times that amount! The contribution limit for a 401(k) plan in 2023 is $22,500, plus another $7,500 if you are age 50 or older. And don’t worry – there is no minimum contribution amount, so you won’t face any penalties if you can’t save that much.

Answer a few simple questions to find the optimal plan for you and your small business.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

Tax advantages of a solo 401(k)

You can fund your solo 401(k) in two ways:

  1. Traditional 401(k): Pre-tax contributions are the most common way to fund. Your contributions will reduce your taxable income, and you won’t pay taxes until you withdraw the money in retirement. You can still contribute post-tax dollars as well.
  2. Roth 401(k): If you expect your income to be higher in retirement than it is now, a Roth 401(k) may be a choice worth considering. These types of contributions are not deductible, but you will not be required to pay taxes on withdrawals or interest on this money after you retire.

Maximum flexibility

A solo 401(k) plan has many features that make it attractive to business owners, including:

  • You can invest in almost anything (stocks, bonds, mutual funds) as long as they pass specific screening requirements set by the IRS This means that your investment options are wide open.
  • No annual filing requirements: Most other types of plans require annual reporting with the IRS; however, there are no annual filing requirements for solo 401(k)s if the total plan balance is $250,000 or less.

Choose to manage your investments – or not

As a solo 401(k) owner, you can select a self-managed plan that allows you to make decisions about where to invest your money—but you don’t have to. Some of your investment options will be:

  • Stocks
  • Bonds
  • Mutual Funds
  • …And more

And can tailor them to fit your savings goals and risk tolerance.

Less fees? Yes please!

A solo 401(k) plan from Ubiquity — we offer two: the Single(k) and the Single(k) Plus — has lower fees than most plans our competitors offer. You’ll see this play out in a couple of key ways:

  • No minimum balance requirements: This means that you can start saving right away.
  • Low, flat fees1: When you choose a Ubiquity Single(k), we never charge assets under management fees, which are a percentage of your balance. We only charge a flat monthly fee. That means when your savings increase, your fee won’t. You’ll pay the same monthly fee whether you have $5,000 or $5,000,000 in your retirement account.

Is a solo 401(k) the right retirement choice for you? Freelancers, self-employed individuals (and those who employ their spouses), and entrepreneurs who want to save for the future—and support their small business now with lower fees, tax breaks, and less paperwork. That’s what we call a win-win-win.

 

 

1 Flat fees are charged by Decimal, Inc. for recordkeeping and administrative services. Third-party service providers may assess asset-based fees to customers. Plan Sponsors are advised to review all service agreements with providers (e.g., investment advisors, custodians, broker-dealers) to evaluate total plan costs.

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

Although being your own boss is great in many ways, one glaring drawback is the lack of a group retirement plan. However, there are savings instruments available that can help you meet your retirement goals even if you are self-employed. One of the best ways to prepare for your future is via a solo 401(k). This type of 401(k) plan goes by different names, including Single(k)®, self-employed 401(k), individual 401(k), or one-participant 401(k).

What Is a Solo 401(k)?

A solo 401(k) is a type of retirement plan that allows self-employed individuals and small businesses with no employees to save for retirement. Ther are some similarities:

  • Contributions are made pre-tax, reducing your taxable income for the year
  • If you have an IRA already set up, rolling over into a solo 401(k) will allow you to combine all of your retirement accounts into one place and manage them through one platform–which makes managing taxes easier!

And there are some notable differences from a traditional 401(k):

  • To be eligible, you must be a business owner with no employees (except a spouse)
  • Non-discrimination and top heavy testing do not apply AND do not require an annual 5500 filing unless you have a balance more than $250,000 (or terminate the plan)

Answer a few simple questions to find the optimal plan for you and your small business.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

Solo 401(k) Plan Benefits

Perhaps the best benefit is that as the business owner, you can make contributions to your retirement account as both the participant and the employer – up to a total of $66,000 in 2023, or up to $73,500 if you are age 50 or older. This is a significant amount of savings each year and can help you build your nest egg fast. But there are many other solo 401(k) plan benefits that make opening a plan worthwhile:

  • Option to take a loan from retirement savings
  • Higher contributions limits than Individual Retirement Accounts (IRAs)
  • Plan administration is extremely low maintenance
  • No nondiscrimination tests
  • Business owners are not required to file annual reports with the IRS until the plan reaches $250,000 in assets.

If your spouse also earns income from your business they can participate in the plan as well, effectively doubling your annual retirement savings. They may contribute to their plan pre-tax up to the IRS limits, and as the employer you can contribute up to 25% of their annual compensation.

Don’t forget about solo 401(k) tax savings. These are some of the most compelling benefits for many sole proprietors:

  • Reduced taxable income for pre-tax salary contributions
  • Ability to make after-tax Roth contributions
  • Business tax deduction for plan contributions and plan expenses
  • Pre-tax growth on investments while in the plan

Setting up a Solo 401(k)

If you have an employer identification number, you can open a solo 401(k). To set up a new solo 401(k), the plan adoption agreement must be signed by December 31 to make contributions for that year. All contributions must be made by the business’s federal income tax return due date, including extensions.

Here are additional resources to help you determine whether to open a solo 401(k) plan:

Why Have a Small Business Retirement Plan?

How to Start a 401(k) for Your Small Business

2023 Retirement Contribution Limits

 

Employer matching contributions are a common feature of many company 401(k) plans, with 98% of employers adding partial or full matching bonuses. The typical American company is matching 6% of employee contributions in 2023.

Employers are also increasingly recognizing the 401(k) employer match as a powerful incentive to encourage loyalty to the company; in 2022, 59% have vesting schedules ranging from one to six years before employees are entitled to walk away with the full amount of employer-matched funds.

If you own a small business or work for one, keeping tabs on what other companies are matching on their 401(k)s can help you gauge how competitive your own plan is and better adjust your contributions for the year.

Partial 401(k) Matches in 2023

In a partial match plan, the employer matches a smaller percentage of what employees contribute. A common partial match is 50 cents for every dollar of employee contribution, up to 6% of the employee’s salary. Even if employees opt to put in a greater amount – say 8% – the employer is still only responsible for putting in up to 6% in that case. So, for instance, a person earning $100,000 a year might contribute $6,000 and receive another $3,000 in partially matched funds.

Full 401(k) Matches in 2023

Full 401(k) matching means employers put in dollar-for-dollar what employees contribute, up to a set default rate or the IRS maximum. While 3% was the norm at one time, 65% of plans are now using a default rate higher than 3% in order to significantly boost savings for participants over time. In 2023, the most common default rate is now 6% of pay, according to the Plan Council Sponsor of America.

Answer a few simple questions to find the optimal plan for you and your small business.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

2023 Safe Harbor Matching Formulas

Safe Harbors are a popular type of 401(k) plan that allows businesses to bypass many of the annual IRS nondiscrimination testing requirements when they agree to a standard matching formula. Any employer contributions made in a Safe Harbor plan must be fully vested for all employees.

The most common Safe Harbor 401(k) matching formulas are:

  • 100% match on the first 3% of employee contributions, plus 50% match on the next 3-5% (Basic match)
  • 100% match on the first 4-6% of employee contributions (Enhanced match)
  • At least 3% of employee pay, regardless of employee deferrals (Nonelective contribution)

401(k) Contribution Limits in 2023

Employees can put up to 100% of their compensation into a 401(k), up to the maximum limit. This year:

  • Employees can contribute up to $22,500 (up $2,000 from 2022)
  • Employees age 50 and older can add an additional $7,500 on top of this amount (up $1,000 from 2022)
  • Employers can add $43,500 to their own 401(k), bringing the total balance up to $66,000 in 2022 (up $5,000 from 2021)

SIMPLE 401(k) Limits in 2023

Employers offering a SIMPLE 401(k) allow employees to save up to $15,000 in 2023, which is up by $500 from 2022. Those age 50 and older may contribute another $5,000 for a total of $19,000.

Employers can contribute dollar-for-dollar up to 3% of a worker’s pay or contribute a flat 2% of compensation regardless of the employee’s own contributions.

Employer 401(k) contributions are subject to an employee compensation cap of $330,000 for 2023.

Engage Employees and Encourage Them to Save With a 401(k) Match This Year

The employer match is an excellent incentive tool to encourage employees to participate in your small business 401(k) plan. Matching not only helps employees create better financial security, but allows you and higher-paid executives the opportunity to max out your retirement savings as well.

Ubiquity is a leading provider of 401(k) plans geared specifically to small businesses. We are happy to help you set up an easy and affordable small business retirement plan with matching and educate your workforce so they understand what a great and valuable benefit you’re offering. Contact us to learn more.

It’s not always easy to figure out how much money you need to save for retirement. When your employer withholds money from your paychecks for federal and state taxes plus Social Security and Medicare, it can be difficult to know how much you can afford to put away for your future. And you may be hesitant to take money out of your paycheck that you may need for normal expenses like your mortgage or rent, food, childcare, etc.

That’s why we recommend using a paycheck calculator. It takes the guesswork out of figuring out how much you should be saving each month, and it helps put your exact income into context.

What is a paycheck calculator?

A paycheck calculator is an online, easy-to-use tool that helps you figure out how much money will be in your paycheck after various deductions, including retirement contributions. The tool will take several pieces of personal information into account:

  • Your current salary
  • The frequency at which you are paid (weekly, bi-monthly, etc.)
  • Tax filing status (married, single, etc.)
  • Other income sources such as earned interest
  • Federal and state taxes
  • Other deductions, such as health or dental insurance expense
  • Current retirement contribution
  • Proposed new retirement contribution

Why use a paycheck calculator?

A paycheck calculator is a tool that helps you understand your finances better so you can make informed decisions about your financial future. It identifies how much money will be in your paycheck after taxes and all other deductions.

It gives an accurate picture of what’s happening with your income and spending, which helps prevent nasty surprises when it comes time for an emergency or some other major expense. And finally, it can help you stay on top of planning for your retirement.

How much money do you need to save for retirement?

This totally depends on your retirement goals, your income, your savings, and the lifestyle you wish to have in retirement. Most employers do not offer pensions, and Social Security is dwindling, so your best course of action is to maximize your own retirement savings while you can.

Your annual 401(k) contribution is subject to maximum limits established by the IRS. For 2023, the maximum contribution for this type of plan is $22,500 per year for individuals under 50 and $30,000 for individuals 50 or older. Employer contributions do not count toward the IRS annual contribution limit, which is good news for those whose employers make these contributions.

Try Ubiquity’s Paycheck Calculator to see how increasing your 401(k) contribution will affect your paycheck amount – and your financial future. It will save you time and stress in the long run by eliminating guesswork.

 

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

 

Read Ubiquity's Guide to Small Business 401(k) Plans
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Talk to Sales
Schedule a Free Consultation

Contact Support
Visit our Help Center
support@myubiquity.com
Monday–Friday
6am–5pm PT / 9am–8pm ET

© 2024 Ubiquity Retirement + Savings
44 Montgomery Street, Suite 300
San Francisco, CA 94104