Small business owners wear quite a few hats:
Accountant, HR consultant, sales lead, recruiter and face of the company. It’s no wonder why they would shirk any additional responsibilities – including offering employee benefits like a retirement plan.
In the past, small businesses have had few retirement plan options that were built for their needs and employees. The industry had no problem marginalizing small businesses in favor of large ones with huge plan assets.
The good news is that those days are long over! Still, many small business owners wrongfully buy into mistruths about retirement plans – especially 401(k)s – that were perpetuated a long time ago and continue to be believed today without merit.
I want to clear the air and put these common 401(k) misconceptions to rest once and for all.
- 401(k) Plans are Time-Consuming and Designed for Big Businesses
Unfortunately, a lot of small business owners are under the impression that 401(k) plans are a one-size-fits-all benefit that can’t be customized to meet their needs without the labor and high fees. Owners envision a heap of confusing paperwork, and they want to sidestep the additional time commitment.
The good news is there are plans available to small businesses that were designed with their needs and employees in mind. No longer do small businesses have to accept plans that are built for gigantic corporations with hundreds, if not thousands of people. Nowadays, plans exist that are customized for businesses with 50 or less employees. There are even 401(k)s built specifically for sole proprietors.
As far as the perceived time commitment, those same plans can be up and running in less than a week and require only an hour each month to maintain.
- Matching is a Must
Even though matching employee contributions is a great way to recruit and retain talent, it’s not a requirement.
If a small business owner doesn’t want to or can’t afford to match, that’s perfectly fine. As an employer, you are already offering a wonderful service to employees by implementing a plan – matching, while there are tax benefits that come along with it, is simply icing on the cake.
For your hard-working employees, at the end of the day, some savings is better than no savings.
- 401(k)s are too Expensive to Implement and Maintain
We know the thought of extra administrative fees weighs heavy in the minds of small business owners. Though there is some relief–through a tax credit—up to 50 percent of the cost to set up and administer the plan.
Ultimately, a plan’s cost depends on the bells and whistles that come with it—some basic plans can cost as little as $90 a month – that’s less than what your business likely pays to fill the water cooler each month!
- High Fees and Poor Advice are Just Part of the Deal
Small business owners face many challenges and work way more than the average person to keep their business running efficiently. Why then do some retirement industry companies still expect you to settle for an inferior plan that charges exorbitant amounts and doesn’t offer solid advice on how to invest? Just because you may have fewer employees does not mean your retirement plan should suffer.
When the right plan is selected, small businesses are able to access low cost, effective funds for their 401(k) plan. No longer will small businesses and their employees settle for poor performing, high cost funds that just absorb returns.
Likewise, employees should not feel like they’re alone and in the dark when selecting the retirement plan that will hopefully lead to their dreams coming true.
Small business owners shouldn’t be misled and buy into common myths that will discourage them from offering a 401(k) plan. Giving your employees a way to save for their retirement is a cheap and easy way to attract and retain talent and maintain an edge against the competition. For employees, participation in a 401(k) plan is a simple, effective way to save for retirement.
Now that you’re armed with the truth, march fearlessly into the next steps of retirement planning!