Having a recurring stream of income after retirement is incredibly important. This is especially true in the modern age where many millennials are somewhat skeptical about the future of social security. Besides the obvious advantages that a 401K can have for your employees, it can also have some serious benefits for you as a small business owner. Here are some reasons why you should offer a 401K.
Attract Top Talent
The skill, knowledge and talent of your workforce all play a major role in how successful your small business is. Offering a desirable retirement plan like this tends to be an effective way to attract highly talented individuals. It gives you leverage over competitors that are lacking a legitimate retirement plan and can serve as powerful incentive for A plus players to join your team. Besides this, it’s proof that you care about your employees and can help improve your company’s reputation. Over time, this can help build your company’s brand equity.
Retain More Employees
There is also a better chance of team members sticking around for the long haul with 401K plan. When a person has motivation like solidifying their financial future and feels appreciated by their employer, the odds of them leaving prematurely are reduced. This can go a long way in minimizing your turnover rate and it provides an opportunity to strengthen team chemistry. While the immediate benefits of this chemistry may not be obvious, there should be a positive impact in the long run because your employees can work more as a cohesive unit with maximum output.
Ensure Your Long-term Financial Security
In addition to helping your employees, this type of plan provides you with a platform to keep money coming in once you have retired. Rather than depending upon social security, a 401K puts you more in control of your financial future. With this option being more affordable than ever and online tools streamlining the plan management process, the long-term benefits usually outweigh the short-term contributions.
According to the Internal Revenue Service, the advantages of sponsoring a 401K plan are that “employer contributions are deductible on the employer’s federal income tax return to the extent that the contributions do not exceed the limitations described in section 404 of the Internal Revenue Code, and elective deferrals and investment gains are not currently taxed and enjoy tax deferral until distribution.”
Consequently, your overall payroll taxes are often reduced, and you may also have the opportunity to get a tax credit when you initiate this type of plan. This is a win-win situation because you’re able to provide your employees and yourself with a retirement plan and many of the costs are offset by tax deductions.
When factoring in all of these benefits, it’s clear that you have much to gain as a small business owner. This can provide you with added fuel needed to expand your business and remain competitive regardless of the industry you’re in.
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