Encourage Employees to Start Saving for Retirement
Siân Killingsworth / 24 May 2023 / 401(k) Resources, Safe Harbor
As a small business owner, you’re responsible for encouraging your employees to plan for their retirement. That can sound like a lot to handle, but don’t worry! With proper education and incentives, it’s easy to help your employees start saving for the future.
1. Educate Your Employees about Retirement Savings
Many employees don’t understand the benefits of saving for retirement (or the consequences of not saving). The easiest way to get your employees involved is to get them learning. We have two favorite ways to do this:
Holding Retirement Planning Workshops
Invite a financial advisor or retirement planner to speak to your small business’s employees about retirement planning, investment strategies, and the various retirement savings plans available. (We suggest doing so during work hours… and with snacks.)
Another way to educate your employees about retirement savings is to provide them with accessible information like brochures, websites, FAQs, and videos. One great resource is the Ubiquity blog, which is full of easy-to-understand articles about 401(k) plans and other retirement topics. You can also give your employees access to financial calculators to help them determine how much they need to save for retirement.
How much will you pay for 401(k)? Get an instant quote.
(just me/or my business partner/spouse)
Or schedule a free consultation with a retirement specialist.
2. Offer Retirement Savings Plans
Offering a small business 401(k) plan is an effective way to encourage your employees to start saving for retirement. By offering a plan, you can provide your employees with a convenient and cost-effective way to save for retirement. There are many options and provisions you can add to a 401(k) plan.
Traditional 401(k) Plan
The classic retirement savings plan for a reason, a 401(k) plan allows your employees to contribute a portion of their salary to a tax-deferred investment account. You can set up a 401(k) plan for your employees and offer them a matching contribution to encourage them to save more.
Safe Harbor 401(k) Plan
This type of plan includes a “safe harbor” provision. It allows small business owners to avoid certain annual IRS tests. This can be a great relief.
In exchange for this, employees receive mandatory contributions to their 401(k)s from the employer. There are some more details and options to this type of plan – read more here.
3. Incentivize Retirement Saving
The best way to inspire your small business’s employees to participate in the 401(k) plan is to offer them something in return. This could be a bonus or additional incentive for those who join the plan, such as a match on their contributions or a one-time bonus.
Additionally, you could provide employees with educational materials to help them understand the benefits of the 401(k) plan, as well as regular updates on their progress and performance. By making the 401(k) plan attractive and accessible, you can inspire your employees to take control of their financial future and save for retirement.
One of the most effective ways to encourage your employees to participate in their retirement savings is to offer matching contributions. This means that you contribute a certain amount of money to your employee’s retirement accounts based on their contributions. It’s basically free money for them, but you get to claim these contributions1 as a tax deduction for your small business.
You can also offer bonuses to employees who save a certain amount of money in their retirement accounts. This can be a one-time bonus or an ongoing incentive to encourage your employees to continue saving for retirement.
1 Ubiquity is not a registered investment advisor, and the information provided herein should not be considered legal or tax advice. We recommend consulting with your financial planner, attorney, and/or tax advisor for personalized advice. Employers with 50 or fewer employees can receive a tax credit for contributing to their employees’ retirement plans. The credit is a percentage of the amount contributed by the employer, up to a per-employee cap of $1,000. The credit percentage is reduced over five years, with 100% in the first and second years, 75% in the third year, 50% in the fourth year, and 25% in the fifth year. No credit for subsequent tax years, thereafter.
2 This credit will generally be a percentage of the amount contributed by the employer on behalf of employees, up to a per-employee cap of $1,000. This full additional credit is limited to employers with 50 or fewer employees and phased out for employers with between 51 and 100 employees. The applicable percentage is 100 percent in the first and second years, 75 percent in the third year, 50 percent in the fourth year, 25 percent in the fifth year – and no credit for tax years thereafter.