4 Key Benefits for Establishing a Small Business Retirement Plan

Are you a small business owner?

Have you  considered establishing a retirement plan for yourself as well as your employees?

Or maybe you work for a small business and would like to encourage the owner to establish a retirement plan. Here are 4 key benefits that make the case for establishing a retirement plan for your business.

1.    Personal Retirement Savings

Over the last few years we have learned that we must be proactive in assuming responsibility for our own retirement savings. The current economy has shown us that we must increase our savings rates in order to prepare for a more dignified future. We have seen that business valuations may not always rise; Social Security payments will likely be less than we counted on; real estate investments may not appreciate as they did in the past; health care costs are rising at an alarming rate; and we are enjoying longer life spans than ever before. All of these things combined create a case for increased retirement savings.

2.    Attract and Retain Valued Employees

If you aren’t offering a retirement plan you are at risk of losing employees to a competitor that does. As a small business owner it’s hard to compete for quality employees with bigger corporations. A retirement plan benefit can be a difference maker.

  • 40% of workers in small companies say they would leave their job for another that provided a 401(k) plan. *
  • 75% of employees ranked “my ability to afford retirement” as their top concern. **

3.    Tax Advantages                                   

A retirement plan offers tax advantages for both the employer and the employee.

  • Employer contributions are deductible for the employer.
  • Employee contributions are not taxed until withdrawn (usually in the form of retirement income).
  • Money in the plan grows tax-deferred.

4.    It’s easier and less expensive than you may think.

A small business can establish a retirement plan such as a 401(k) at minimal cost and maintain flexibility if necessary to minimize the financial obligation during slow business cycles. In addition there are current tax credits available to small business owners establishing a retirement plan that can offset some of the costs.

Preferred Financial Strategies, Inc. partners with some of the best retirement plan providers in the industry. We have access to low-cost yet sophisticated plan providers with open architecture that allow for a robust list of investment options.  As a fee based advisor, we can serve as an advisor on the retirement plan and provide employee financial education as an additional benefit.

Recently The Department of Labor’s Employee Benefits Security Administration (EBSA) released a final rule that will help America’s workers manage and invest the money they contribute to their 401(k)-type pension plans. These new rules will ensure: that workers in this type of plan are given, or have access to, the information they need to make informed decisions, including information about fees and expenses; the delivery of investment-related information in a format that enables workers to meaningfully compare the investment options under their pension plans; that plan fiduciaries use standard methodologies when calculating and disclosing expense and return information so as to achieve uniformity across the spectrum of investments that exist among and within plans, thus facilitating “apples-to-apples” comparisons among their plan’s investment options; and a new level of fee and expense transparency.

Due to these new regulations many employers or plan sponsors are re-evaluating their current plan providers. If you are a decision maker within your organization and considering a new solution for your company retirement plan please give us a call.

We can help you make sense of your options and work with you to establish the right solution for your individual needs.

Below is a link to a summary of the various Small Business Retirement Plans that are available and details to help you determine which plan may be appropriate for your organization.

Retirement Plans for Small Businesses

*Survey by Harris Interactive, sponsored by ShareBuilder 401(k), a subsidiary of ING Direct.

**2011 Top Five Total Rewards Priorities Survey, Deloitte Consulting LLP

About Sara Seasholtz

Sara Seasholtz, CFP®, was voted one of "50 Most Influential Women in Charlotte" by The Mecklenburg Times in 2011, and has assisted her clients with their financial planning needs for over 40 years. Have a financial question? ASK SARA!


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