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Small Businesses have a big retirement problem. According to Bureau of Labor Statistics, at companies with fewer than 50 workers the not even half the employees have access to a 401(k) or pension. At companies with 500 workers or more, 90 percent of employees have access to a retirement plan. Setting up an employee retirement plan can seem daunting for small business owners—if not impossible. Let’s clear up some misconceptions and review a few of the many reasons why offering an employer-sponsored retirement account is a great idea for small businesses of all types.

Investing in Your Employees Creates An Invested Team

How badly does your team want retirement? According to a 2015 Glassdoor survey, 31 percent of workers valued a workplace retirement account, such as a 401(k) or pension plan, over an increase in pay.

Even your team members who would prefer a wage pump want help preparing for the future. The Employment Benefit Research Institute found that two-thirds of employed workers not currently saving for retirement say they would be likely to start if automatic paycheck deductions ranging from 3 to 6 percent were used by their employer.

By offering a retirement plan, small businesses may be able to attract more talent—and retain the valuable team members they already have.

Low-Cost, Low-Hassle Plans

There’s a toxic myth floating around that retirement plans have to be clunky, expensive, and require an annual 1.5-2% fee to a provider. That’s a misconception! Nowadays, there are low-cost options, specifically designed for small businesses. (Full disclosure, we think our plans are pretty great. Check them out here)

Besides providing lower costs, choosing a third-party plan provider allows you to delegate certain plan responsibilities to let you focus on what you do best—running your business.

Use Plans to your (Tax) Benefit

Did you know those fees to set up and run a retirement plan may be tax deductible? Using Form 881, eligible small-business owners can claim a credit of up to $500 for qualified setup and administration fees, and costs to educate employees about the plan for each of the first three years of the plan. Just keep in mind that whatever plan expenses you use toward this credit, you can’t use as business expense deductions.

In 2017, the Employee Benefit Research Institute found that nearly 73 percent of workers not currently saving for retirement would be at least somewhat likely to start if contributions were matched by their employer. The good news for employers is that the IRS usually allows them to deduct these matches, subject to contribution limits on qualified employee plans (including the employer’s own plan).

Remember that all deferred employer contributions, including earnings and gains, are tax-free for employees until distributed by the small-business retirement plan. This is why an employer contribution is so valuable.

Bottom Line: Start Saving Today

As a small-business owner, it makes sense to look into offering an employee retirement savings plan. It’s an easy to implement perk that your team will value, is available through lower cost options, and provides tax breaks to both employees and employers. Sponsoring an employee retirement plan attracts and retains the best talent for your business. Showing your employees you have their interests in mind creates a happier, more engaged, and ultimately more successful team.

Learn More:

Download our Definitive Guide to Small Business 401(k)

I have always been a diligent saver, scared at the thought of racking up huge credit card debt or not being able to pay my mortgage. Lucky for me, my husband is the same way and we have always been good about saving money. Having that “rainy day savings fund” has always been an integral part of our monthly budget, a safety net in the event of something unexpected. We have always heard that it’s a good idea to have at least six months salary saved up in case of a job loss or medical emergency, but it wasn’t until recently that we discovered just how important this was.

Imagine you are in a life-or-death situation, and to navigate it you need a little bit of money. You’d want to be certain that you had the money to spare, right?

The Importance of Emergency Savings

Dexter rests after surgery

Rewind 14 years, when I used to work for a pet rescue organization. During that time I trapped, socialized and nurtured back to health a small white kitten just three weeks old who I named Dexter. Dexter has been with me throughout many important life events – my marriage, the birth of my child, and countless other memories. He sits with me on the couch, sleeps with me at night and provides me constant companionship, along with my two other cats.

A few weeks ago I noticed Dexter limping, and a few days later he suffered a fall jump whereupon he fractured his left heel. An emergency room visit, exam, and x-rays set me back $450, but that was just the beginning. It was during that visit that we found out that it was more than just a fracture, in fact, Dexter had bone cancer.

The follow-up visit to the vet for more x-rays and bloodwork totaled $527, so by that point, we had already placed almost $1000 on our credit card, but how could I not provide care for my pet of 14 years when he was limping around in pain? I couldn’t bear to see him suffer so I met with the oncologist who laid out my options.

To put in bluntly, either we proceed with amputation surgery to remove his leg (and the tumor), or my cat spends the rest of his (shortened) life in pain while cancer spreads throughout his body. If we want to end that pain early, well… you can figure out what that option was. Without even a second glance at the estimate of $3,200 I asked the oncologist to proceed with the surgery because regardless of the cost, I wanted to give Dexter the best life and medical care that he needed.

I could choose to do this because I had been a diligent saver all of these years. I didn’t have to rack up huge credit card debt or take out a small loan because I had squirreled away money in my savings account in case of an emergency. Sure it was hard to put my extra money in the bank and not buy those shoes but at the end of the day, who gives a hoot about material goods when I was able to save a life!

It’s been two weeks now since his surgery and Dexter is adapting to life with three legs. The fibroid sarcoma was removed and the vet told me that there is a 75% chance that it would not have metastasized (fingers crossed!). If within a year his follow-up x-rays are clear, then Dexter will have beaten cancer!

I certainly don’t know what the future holds. Did I extend his life by a few months or a few years… that’s yet to be determined. But I do know that however long he is with me, living pain and cancer-free, it was all worth it. And it was all made possible by the fact that I had an emergency savings account!

*November is National Pet Cancer Awareness Month. If you have a furry companion, please educate yourself on the signs and facts of cancer.

I can still remember the day my parents gave me my very first credit card. I was still in High School, and they made me a user on their credit card. Since I had a part-time job I earned money every week, and they told me that I was free to use the credit card as much as I wanted, as long as I paid off my portion of the charges by month-end when they were due. My parents never were, and still aren’t the type to carry credit card debt; any purchases put on the card are paid off as soon as they receive the bill.

Looking back, this was a huge amount of freedom which they gave me, but it also helped to teach me a lesson in very practical terms. They showed me that they trusted me enough to be a responsible young adult, and I, of course, wanted to prove to them that I was one. Every time I used the credit card I wrote it down in my journal, and at the end of the month, I gave them the cash to pay off my purchases. It was a win-win for both of us and I learned very quickly the concept of “don’t’ spend money you don’t have.” Though I was still young, I envisioned replicating this same scenario with my own children someday.

Then I got to college, and THAT was a different story.

My part-time job went away and I no longer had discretionary income coming in weekly. My parents sent me money to cover living expenses and the sort, but that was to buy food, books and other items that college students needed. It certainly wasn’t enough to keep shopping or going out, and there were things I wanted. Not that I needed, but wanted. At first, I used my credit card for small things, like dinner out or some new clothes. Somehow I scrambled and managed to make the payment at the end of the month. But then it started getting bigger and bigger until one month I ended up spending a few hundred dollars on cosmetics at the department store, and when the bill came due, I couldn’t pay it.

My dad could have just paid it off or asked me to pay it in installments, but I don’t know if that would have had a great impact. Instead, he made me gather up everything that I bought, marched me (and the items) back to the store and told the clerk that I purchased them without having the means to pay for it and that they needed to be returned. I was mortified and horribly embarrassed, but it was the last time I used their credit card for a frivolous purchase.

Now that I am a parent, I plan to do the same with my son. I know that credit card companies actively pursue college kids on campus, but I plan to make him an authorized purchaser on my credit card long before then. I want him to understand cause and effect, how to responsibly use credit and be able to live by the motto – “Don’t Spend Money You Don’t Have!” Then, when he chooses to establish his own credit, I will have hopefully instilled good habits!

As soon as my son was born, my husband and I opened a saving account for him. We felt this was important because we received many cash gifts for him, and we wanted to keep this money separate from ours; after all, it’s HIS money. He is four now, and since his birth, we have deposited all of his cash and checks into this account, and it’s grown quite a bit (far more than mine!). Once he was old enough to begin to understand the concept of money, we introduced him to what we call the 50/40/10 rule.

Quite simply, 50% of all the money he receives (either earned or gifted) must go into a savings account. Period. No questions asked. His age prevents him from completely grasping the concept of savings, but I know that repeated reiteration of just the word “savings” will help integrate it into his vocabulary and hopefully will become standard practice for him as he gets older. When he becomes an adult maybe the percentage will change, but it’s my goal to teach him that he has to incorporate savings into his overall money plan.

The 40% is what we call the discretionary piece. Though D is still too young to need discretionary spending, I believe when he gets older, 40% of what he either earns or is given should be determined by him. Maybe he will choose to save that money (great!) or maybe he’ll use it to buy something he wants. Either way, I am trying to equip him with the right mentality that he shouldn’t just spend everything he receives as a gift. Half of it has to be saved, and some of can be used for fun.

Lastly comes the 10% and this is another non-negotiable. This portion of his money must be given to charity, and it’s with this part that we really get to have fun. My husband and I kept track throughout 2012 and at the end of the year, we told D how much he had to give. Then we asked him to choose three charities to whom he wanted to contribute. He asked us for suggestions, and we gave him some based on both his and our interests. It was really warming to see him ask questions about each charity – about what they did and who they helped. It’s so important to me that D realize that there are many who are less fortunate in this world and that it’s up to him and his generation to step up and make a change. At his age, contributing money toward these causes is how he can help.

In the end, D chose three different charities. It’s important to let your child choose for themselves to whom they want to give because it teaches them they have a choice over where their money will be spent, even if not over the amount.

Remember that many of these values that you instill in your child from an early age will stay with them their whole lives, so start talking about money now!

I don’t know about you, but the last time I had a savings of any kind was back in 2007—as in, five years ago. It wasn’t much—but it was something–certainly not enough to retire on! My 401(k) back in the day wasn’t too bad either. But when that medical hardship came down like a ton of bricks, that’s what I had to pull from.

When life fell apart in 2008, I could not get my brain wrapped around the idea of saving even two nickels. Obviously, those two nickels, along with every couch-surfing penny I had, were already spoken for.

You may have seen in my previous blog post that I am on a personal mission of EPIC PROPORTIONS. Last week, I paid every single one of my bills. Every one! And I still managed to put 5% of my paycheck into my 401(k)!

Let’s discuss that for a minute.

I started out at 4% because that is what’s recommended, and because my employer has a match up to 4%. That is FREE MONEY! I don’t walk away from free money. EVER.

Even though all the online retirement calculators I have used say something like: “You’re not saving enough!” and there is usually some form of extremely judging frowny-face staring at me indicating with its beady black eyes that I will end up in a box under a bridge. Whatever! You can’t intimidate me! I’m on a mission!

The truth is I don’t know anything about investing. And, as much as I have been doing my homework, I want to make something clear—this stuff makes my brain hurt. You want me to add 1 + 1 without the use of a calculator? Good luck with that (even with a calculator).

Luckily for me, there was a no-brainer investment option, catering specifically to my lack of knowledge: Morningstar. It was a click of a button and BOOM! Money is saving away, it’s not scary, and I feel like I can move on with my life.

The super awesome thing is that I was so excited about saving, that I went and bumped up my contribution to the 5% I was bragging about up there. And you want to know the even MORE awesome part? Because it’s pre-tax dollars going in, it literally put more money in my paycheck. How the heck does that work? I’m saving more and I am bringing in a few more bucks. It’s magic I tell you! It makes me wonder. Can I get to 6%? 7%?

Bring it on!

What are you doing over there? Are you saving? I challenge you to a savings duel! No one likes doing this alone. So why don’t we trudge through it together?

Stay classy, America.

Sylvia, aka Debt Girl

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1160 Battery Street, Suite 350, San Francisco, CA 94111 / Support: 855.401.4357

© 2018 Ubiquity Retirement + Savings / Privacy Policy
1160 Battery Street, Suite 350, San Francisco, CA 94111 / Support: 855.401.4357