Why offer a 401(k) plan? - Retirement Planning for your Business
A 401(k) plan is more than just an employee benefit, but an economic security tool for your business. When employees are equipped with the tools they need to retire in comfort they in turn have disposable income and are far more likely to not only spend it in the local economy, but also be happier in their workplace without the added stress of thinking about retirement and thus be more productive.
Recent polls have found that in over 70% of small companies, employees were not offered a 401(k) plan. Why such a low number? There are perceptions that the plans are hard to administer and costly to start. Some companies may not feel that they, or their employees, would see a large benefit because those who are offered would not want to participate in such a plan.
Why offer a retirement plan? Here are a few reasons for businesses to consider.
Some of the most obvious reasons to offer a 401(k) plan is to not only retain employees, but also attract talent. A 2012 MetLife study has found that retirement benefits are a significant factor in employee loyalty after their salary, and other perks such as health care coverage. With the job market tight for highly skilled workers, having a retirement plan in place is a great way to lure new talent to your company. Small companies should work to provide similar benefits as those offered by larger companies if they want to see their business grow. Retention of employees and keeping a low turnover rate can not only avoid the extra cost of training new workers, but help establish a culture of trust and foster relationships with customers and clients.
Another great benefit of 401(k) plans is that owners can also participate. The plans can also be setup for companies that are essentially sole proprietorships, which is favored among startups and entrepreneurs. Commonly, a business owner can put away more money in a 401(k) than an IRA. Small businesses can also get a credit for the first few years, which can help to make up the difference of establishing the plan and administration costs.
Setting up a 401(k) plan is not difficult, and taking the time to be proactive in increasing participation among employees should be considered. The long-term benefits of employee retention and productivity are a few of the most common reasons to offer a plan. Part of the problem of the 401(k) industry is that people believe it is too complicated. Finding a Certified Financial Planner (CFP) can not only make finding the right plan simple and cost effective, but is an important step to finding the right retirement solution for your employees. A CFP can make sure you're getting the plan suited best for your business with the highest return, and can secure your financial well-being for your company and your employees.