It’s no secret that the life of a small business owner is a lot of work. Especially in situations where you only have a few employees (or none at all), you have to act like the Swiss army knife of your business––ready for anything and prepared for any situation. So, why add the hassle of having to pay for and run a retirement plan along with everything else? You might even wonder, is my business too small to for a 401k plan?
Here’s the scoop: A 401k is no longer a benefit reserved exclusively for large businesses with budgets to match.
There are budget-friendly, easy-to-use 401k solutions designed specifically for small businesses. Small business owners can now take advantage of the business tax benefits of a 401k plan and offer competitive retirement plan benefits for employees.
Not too familiar with 401(k) plans? No problem.
What is a small business 401k?
First things first: A 401k plan is a type of company retirement plan under Section 401(k) of the Internal Revenue Code. That part isn’t so important — here’s what is: A 401k allows you to save for retirement by putting away money on a pre-tax basis, which helps you to lower your taxable income. What’s that mean to you? It means you’ll get less of a tax bite on your annual salary in the short term, while your long-term investments grow tax-free until you’re ready to retire. Some 401k plan providers (including Ubiquity) also offer an after-tax (Roth) option, which means you won’t be taxed at the time you withdraw that money because you’ve already paid taxes on it.
A small business 401k is defined as a 401k plan for a company with anywhere from one to 100 employees. Here at Ubiquity, we specialize in the retirement plan needs of small and growing businesses, including owner-only and start-up businesses.If your business only employs you, your spouse or partner, and employees who would not be eligible to participate in a plan, a Single(k)® plan would your best option.
Small business 401k plans offer unique benefits to both business owners and their employees who participate in the plan.
Busting 401k Myths
Myth #1: 401k plans are too expensive for small businesses.
It’s true that many 401k plans are designed to only suit larger businesses. But the growing trend is to offer efficient, Web-based 401(k) plans that are more affordable to businesses of all shapes and sizes. Plans cost less than a daily latte, and employers have options for splitting costs with their employees.
Myth #2: 401k plans require an employer match.
An employer match or profit-sharing contribution is entirely optional with a 401k. If you choose to offer this feature to your employees, it could help to boost participation. Keep in mind that employer contributions are also tax-deductible for your business.
Myth #3: Our employees won’t participate because they don’t make enough money.
There is no minimum contribution required with a 401k. Offering an employer match can provide additional incentive for your employees to participate in the plan.
Myth #4: It’s too complicated.
Starting a 401k plan doesn’t have to be convoluted. With the right plan, you can get a new plan running in just a few hours of your time. And it’s easy to manage, with tools and reports available right at your fingertips.