What is a SIMPLE IRA?

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is designed specifically for small businesses with 100 or fewer employees. It’s an easy-to-administer retirement plan that is typically a low cost way for employers to offer retirement benefits.

• Contribution Limits: In 2024, employees can contribute up to $16,000, with an additional $3,500 in catch-up contributions allowed for those aged 50 or older.
• Employer Contributions: Employers are required to contribute to the plan. They can either:
  1. Match up to 3% of the employee’s salary, or
  2. Make a flat 2% contribution for all eligible employees, regardless of whether the employee contributes.
• Simplicity: One of the biggest advantages of the SIMPLE IRA is its ease of administration. It requires minimal administration, making it an attractive option for small businesses.

However, there are also some drawbacks:

• Lower Contribution Limits: The contribution limits are lower than those of a 401(k), which may limit the amount owners and employees can save annually.
• No Loans Allowed: Employees cannot take out loans from a SIMPLE IRA, which reduces its flexibility in case of financial emergencies.
• Withdrawal Penalties: Early withdrawals within the first two years of participation are subject to a steep 25% penalty, which drops to 10% after that period.
• Lack of Flexibility: Fixed employer contribution amounts and immediate vesting limit the options for designing a plan.

What is a 401(k)?

A 401(k) is a more flexible retirement savings plan fit for businesses of all sizes. It allows for higher contribution limits and more customization, but it does come with potential higher administrative costs and complexity.

• Contribution Limits: In 2024, employees can contribute up to $23,000, with an additional $7,500 in catch-up contributions for those aged 50 and older. These higher limits allow employees to save faster for retirement.
• Employer Contributions: Employers have the option to contribute to the plan but are not required to. If they do, they can choose from various matching formulas. Employers can set a vesting schedule for the match, meaning employees gain ownership of these funds over time rather than immediately, as in a SIMPLE IRA.
• Plan Flexibility: 401(k) plans offer much more flexibility, such as the ability to take out loans against the account balance that they pay back to themselves over time. This feature can provide employees with access to funds in times of financial hardship.
• Complexity and Cost: Administering a 401(k) can involve more complexity and higher costs compared to a SIMPLE IRA. Businesses may need to conduct annual compliance testing and provide regular reporting, which can be costly and time-consuming. Luckily, 401GO eliminates the administrative burden and makes 401(k) plans easy to offer and manage.

Ready to learn more? Let’s talk.

 SIMPLE IRA and 401(k): Which Retirement Plan is Right for You?

Both the SIMPLE IRA and 401(k) offer significant retirement savings benefits, but the right choice depends on the needs and size of the business, as well as the savings goals of the employees.

• SIMPLE IRA is ideal for small businesses looking for a low-cost, easy-to-administer plan. The mandatory employer contributions ensure employees receive some retirement benefits, even if they choose not to contribute themselves.
• 401(k) is better suited for businesses that want to offer more flexible savings options, higher contribution limits, and plan customization, such as the ability to take loans or implement a vesting schedule. The benefits of increased savings potential and flexibility can give a business a plan specifically designed to meet its needs.

Conclusion

Choosing between a SIMPLE IRA and 401(k) is an important decision for both employers and employees. Each plan has its own set of benefits and limitations. For small businesses that want simplicity and lower costs, the SIMPLE IRA may be the best fit. On the other hand, businesses that want to offer their employees more flexibility, higher contribution limits, and a customizable plan will find the 401(k) more advantageous. In the end, the choice depends on the business’s needs, budget, and how much employees wish to contribute toward their retirement. To learn more and get a sense for whether your specific circumstances are better suited to a SIMPLE IRA or 401(k), schedule a meeting with me and we can discuss it together.

The post SIMPLE IRA and 401(k): Understanding the Key Differences appeared first on Fast and Affordable 401k for growing businesses.

Hesitation is common and understandable, but implementing a 401(k) plan can be a game-changer for your business. Let’s talk through some of the key benefits and challenges of offering a 401(k) plan, and how 401GO is upending the industry to make it much less painful.

The Benefits

Around ⅔ of American companies offer a retirement benefit to their employees. What makes it so valuable to these businesses?

• Attracting and retaining top talent: In today’s competitive job market, top candidates are looking for more than just a good salary. According to Forbes, retirement plans are the third most important benefit to employees, after only healthcare and life insurance. A 401(k) plan can significantly boost employee morale and loyalty, leading to higher retention rates.

• Tax advantages for the company: Tax benefits are one of the most compelling reasons to offer a 401(k). Contributions you make to your employees’ accounts are tax-deductible, reducing your overall tax liability. And, your startup may qualify for tax credits to offset the costs of setting up and administering the plan.

• Long-term financial security for employees: For a startup, 401(k) plans can reduce employees’ stress and improve their productivity. Knowing that they have a solid retirement plan can allow employees to focus more on their work and contribute more effectively to your company’s success.

The Challenges

Young and small companies have unique needs, making a retirement benefit feel out of reach.

• Initial setup costs: Setup expenses such as fees for plan design, legal services, and setting up administrative processes can be a barrier of entry for many small businesses and startups.

• Ongoing administration: For a startup with limited resources, the ongoing responsibility of managing employee contributions, handling plan documentation and employee notifications can be daunting.

• Regulatory compliance: 401(k) plans are subject to strict regulations and compliance requirements set by the IRS and the Department of Labor. Keeping up with these regulations demands a thorough understanding and diligent management, which can be challenging for a small team.
• Financial strain on a growing business: Balancing the desire to provide attractive benefits with the need to maintain financial stability is a common challenge for many startups.

The Good News

There are ways to alleviate the challenges that businesses face when offering a 401(k) plan, and in some cases, removing them altogether.

First, choose the right plan provider. Look for a provider who offers comprehensive services, including plan setup, administration, and compliance support. 

Next, minimize costs by starting with a basic 401(k) plan that meets essential requirements. You can always enhance the plan’s features as your startup grows. 

Last, leverage technology to simplify plan administration. Look for plan providers that offer user-friendly online platforms for managing contributions, compliance, and reporting.

Consider using 401GO as your retirement plan provider. Built for small businesses, we handle all administration, recordkeeping, and compliance for the plan, effectively eliminating the admin burden for the business owner. We offer a wide range of plan types to accommodate your circumstances, and our setup time is an astounding 15 minutes. Competitive pricing saves you thousands of dollars compared to legacy retirement providers. And, our technology is second to none. The 401GO platform is heavily automated and easy to use, which drives down costs for small companies.

With 401GO, you can maximize the benefits of offering a retirement plan while minimizing the challenges that you will face. The decision to offer a 401(k) plan should be based on a careful assessment of your startup’s resources and long-term goals. With thoughtful planning and execution, a 401(k) plan can become a valuable asset for your business, helping you build a motivated, loyal, and financially secure team.

The post Why Your Startup Needs a 401(k) Plan Today appeared first on Fast and Affordable 401k for growing businesses.

What Is a Safe Harbor Plan?

As the name suggests, a safe harbor is a place where you can feel secure. In life, you may consider your home or your family a safe harbor. Businesses that have “safe harbor” in their name often include mental health services, legal services, hospice care and yes, even maritime services in literal harbors. But in legal terms, a safe harbor refers to being protected from legal actions when you meet certain qualifications.

The IRS has a safe harbor plan that offers a kind of amnesty to workers who have not paid all the taxes they owe, and another safe harbor plan allowing landlords to deduct expenses related to their tenanted property. The one that we’re talking about today is a Safe Harbor plan for 401(k)s. This type of 401(k) allows employers to sponsor and operate their plan without having to submit to the same types of government audits that other businesses must submit to. How do they get this sweet deal? Basically, they pay for it.

Who Needs a 401(k) Plan Audit?

The government mandates that businesses that have 100 or more participants in their 401(k) plan conduct yearly audits. Although mandated by the Department of Labor and the IRS, these audits must be commissioned by the businesses themselves and completed by an independent, qualified third party (not your financial advisor). However, there are many exceptions to these audit rules, such with businesses that have regularly fluctuating numbers of employees, like accounting firms during tax time. The IRS has a helpful document about filing requirements, and you may not be surprised to find out it includes a disclaimer that says the list of requirements and exceptions is not exhaustive.

The cost of a 401(k) audit can range from a few thousand dollars to tens of thousands of dollars, making the administration of a 401(k) plan much more expensive — perhaps prohibitively so to small businesses.

While many of us may enjoy thinking of the IRS as capriciously nefarious, these audits exist to prevent some unscrupulous small businesses from hoarding all the benefits of a 401(k) for their owners and highly compensated employees. Additionally, audits identify situations in which businesses may not be in compliance with ERISA laws, as well as look for possible financial reporting errors. If problems are found, businesses are often allowed to address them to bring them back into compliance before being slapped with a fine. However, corrective action can be expensive as well and take months to complete.

Safe Harbor: A Get-Out-of-Audit Free Card

To a small business, this type of oversight can sound taxing. For this reason, many turn to a Safe Harbor 401(k) plan, which does not require regular audits. Why is this allowed? Because small-business owners who start a Safe Harbor 401(k) are required to contribute to the accounts of participating employees, rather than using their 401(k) plan as a vehicle to stash tens of thousands of dollars away for themselves while offering nothing to employees. This is known in the industry as operating a “top-heavy” plan, which is prohibited with traditional 401(k)s.

Employers with a Safe Harbor 401(k) must match employee contributions 100% up to 3% (or 50% up to 6%, etc.). Depending on the number of employees you have, this can be a significant expense — one that you hadn’t counted on, if you were considering offering a 401(k) with no employer match.

To the uninitiated, a 401(k) without an employer match may look no more attractive than a personal IRA — and you don’t have to wait around for vesting. But the max individual contribution to an IRA is $6,500, while the max individual contribution to a 401(k) is $22,500. So a 401(k) with no employer match is better than an IRA, but not better than quitting and taking a job with a company that offers an employer match.

Additionally, when you sponsor a Safe Harbor 401(k) plan, you must offer your employees immediate vesting. No holding their retirement savings hostage while they toil away for years in a state of feigned loyalty.

The government believes these “drawbacks” are worth the tremendous benefit of being able to skip out on yearly audits.

Is a Safe Harbor Plan Right for You?

Small-business owners must ask themselves a number of questions to help determine whether a Safe Harbor plan would be a good choice for them.

1.       How much is the plan likely to cost me in employer contributions to employee 401(k) accounts?

2.       Is this significantly more or less than the expected cost of an audit (if employer contributions are an uncertain factor)?

3.       Is my company’s size likely to change much over the next few years?

4.       Relative to vesting, do I have high, medium or low turnover?

5.       What are my overall goals for a retirement plan for my company and myself?

Your accountant or financial advisor may be able to help with some of these answers. When you decide whether you want a traditional or Safe Harbor 401(k) plan at your small business, 401GO is the place to get it. You can set your plan up in minutes, rather than weeks or days, and it will practically run itself with our 360-degree integration with payroll systems. Set a goal today to learn more, come to a decision and start your company’s 401(k) plan.

The post Safe Harbor or Traditional 401(k): Which Is Better for Your Small Business? appeared first on Fast and Affordable 401k for growing businesses.

That’s not because those things aren’t important; it’s because 401GO has built-in fintech solutions that make these considerations moot. 

Let’s start with the considerations you will want to make.

1.   Financial Stability

Before you seriously consider sponsoring a 401(k) plan for yourself and your employees, assess the financial stability of your business. Implementing a 401k plan can involve a number of costs such as employer contributions and administrative fees. While you should ensure that your business has the financial capacity to sustain these expenses in the long term without compromising other critical operations, if you work with 401GO, many of your administrative costs will be much lower than average. Additionally, new businesses that start a 401(k) may be eligible for a tax credit of up to 100% of startup costs up to $5K a year for the first three years.

2.   Business Growth

Most small businesses start with either very few employees or none. If the business is successful and grows, it may require more employees to help run it. This is the stage at which many small-business owners start to think about offering a 401(k). It’s the time when you can make better predictions about the future, forecast earnings more accurately and be more reasonably certain that you will be able to sustain such a program.

3.   Employee Retention

Once you have employees, you’ll want to keep them — the good ones at least. Most people know that the way to keep any relationship, in the workplace or otherwise, is to work to ensure that the other party is happy or at least content with the situation as it is. While there is definitely a wide variety of what employees and employers consider necessary and acceptable in an employee/employer relationship, there are a few things that most people agree are important. These include compensation, workplace environment/culture and benefits. If you fall short in one of these categories, the other two won’t matter much. No one will want to stay at a job where they are paid well and have great benefits but are yelled at, overworked and harassed. We’ll leave you to manage compensation and environment and focus only on benefits — a 401(k) program specifically. 

A 401(k) plan is mentioned continuously by workers as one of the most important benefits an employer can offer. So if you want to keep your employees (and especially if you want to keep them away from the competition), consider sponsoring a 401(k) program at your company.

4.   Legal and Regulatory Environment

Stay informed about retirement plan regulations and any legal obligations imposed on employers, or work with a financial advisor who can do this for you. It’s important to stay in the know about federal and state laws related to retirement plans, such as reporting requirements, contribution limits and compliance obligations. Ensuring that your business can meet these obligations helps to avoid potential penalties or legal issues.

If you work with 401GO, here’s what you won’t need to worry about:

1.   Administrative Considerations

Many small-business owners need to tackle the jobs of evaluating the administrative requirements and responsibilities associated with managing a 401(k) plan. Not so with 401GO. We have fintech solutions that make quick work of many of these tasks, all with zero effort from you. You won’t have to worry about whether your business has the resources, time and expertise to handle plan administration or even the cost of outsourcing these responsibilities to a third-party administrator — we’ve got you covered.

2.   Employee Communication

Depending upon whom you choose as your 401(k) plan administrator, you may need to put in time and effort to communicate with employees about the new retirement benefit and notify them of their eligibility to participate. It’s important to know who is eligible to participate and who is not, and to provide them with the info they need to decide about investment options and contribution levels. At 401GO, we can help with participant onboarding and notification, so you don’t have to go it alone.

Before moving forward, do these:

Create an Employer Contribution Strategy

If you are able and willing to make matching contributions to your employees’ accounts, determine how much this amount should be. Matching contributions aren’t mandatory, but they can incentivize employee participation and increase the value of the plan. Analyze your budget and align your contribution strategy with your business’s financial goals.

Do Market Research

Research and compare retirement plans offered by other businesses in your industry or region so you can understand the prevailing market practices and benefits packages provided by competitors. This can help you determine if offering a 401(k) plan is a competitive advantage or an industry norm that you need to match.

Determine Plans’ Design Flexibility

Consider the flexibility and customization options available in 401(k) plan design. Evaluate whether the plan can be tailored to meet your business’s specific needs and align with your company culture. Having a plan that can adapt to your changing needs can make it more suitable for implementation.

Seek Professional Guidance

For help making important decisions, look to retirement plan specialists, financial advisors or HR consultants who can provide insights into the specific considerations for your business. They can help you navigate the decision-making process, assess the financial impact and ensure compliance with regulatory requirements. 401GO partners with top financial advisors across the U.S. — ask us for a recommendation for a financial advisor in your area.

The post Is It Time for Your Small Business to Offer a 401(k)? appeared first on Fast and Affordable 401k for growing businesses.

We get it — times are tough — but it’s not impossible to save for retirement. And the sooner you start, the bigger your nest egg will be when it comes time to retire and enjoy life. Opening an IRA through 401GO is one of the fastest, easiest and best ways to take concrete steps to a more secure future.

What Is a Millennial, and Why Don’t They Have Any Money?

Today, in 2023, millennials are between the ages of 25 and 40. Most of them likely expected to own homes by now, have a spouse and 2.5 children and spend their weekends mowing the lawn and driving their kids to soccer games and birthday parties. Sadly, many of them have been unable to realize this dream. Why? As Bruce Springsteen (a true baby boomer!) said in his iconic ballad The River, things are bad “on account of the economy.” Whether you understand exactly what about the economy is leaving your pockets empty these days or not, the truth is that all too often, there’s too much month left over at the end of the money.

Anyone who has been to a grocery store or a dollar store in the U.S. this year knows about inflation — so many items are significantly more than they were even a year ago. And inflation isn’t limited to goods and services — it costs more to borrow money now as well. Just a few years ago, mortgage interest rates dipped below 3%; now they’re 7.83%. Likewise, the median home price in West Virginia, according to Zillow, is up to $155,773, while in Massachusetts, it’s $577,875. With the lower mortgage interest rate, that home in Massachusetts will cost you $300K in interest over 30 years; with the new, higher rate, it’s $1 million. Who has a million dollars?! 

Additionally, while millennials owe the lowest average amount in student loans ($33K versus $43K for Gen X and $45K for baby boomers), more millennials have student loans than any other generation. Inflation, rising home and rent prices, and burgeoning debt make up a trifecta of oppression that is keeping this generation down. How can you fight back? By saving, against all odds.

How to Save for Retirement

Michelle Singletary, legendary Washington Post personal finance writer and author of the wildly popular column The Color of Money, frequently quotes her grandmother, “Big Mama,” a nurse’s aide who never went to college but managed to pay off her mortgage by being extra careful with money while raising five grandchildren. How did she do it?

Singletary — and others who give financial advice — tell workers to pay themselves first. If you’re waiting to have money left over to save for retirement, you will never get there. You have to make saving a priority. That’s why participating in a 401(k) plan through your work can help you achieve this goal. The money goes straight from your employer to your retirement account, so you can’t spend it. And if you’re lucky, your employer kicks in some matching funds.

Here at 401GO, we help small and medium-sized businesses get a 401(k) plan up and running so employees can begin saving for retirement sooner. It’s a great service and a great way to save for retirement — but it isn’t the only way. Another useful vehicle for saving for retirement is an IRA.

IRA vs. 401(k)

Most financial gurus agree that 401(k) plans have a bit of an edge over IRAs. But IRAs have their place as well, and many people have both.

The best part of a 401(k) is the match, and if you aren’t getting a match, you may not be any better off with a 401(k) than you would be with an IRA. The match is supposed to be a sort of carrot on a stick that encourages you to give in to inertia and stick with your employer until you are fully vested, rather than skip out as soon as you get a better offer from another company. Without this incentive, employees move around more (and they take their 401(k) money with them).

However, if you’re one of the millions without access to a 401(k) or other workplace retirement option, an IRA could be your best choice. You can own one privately, so it won’t be connected to your employer, and if you ever leave your job, you can roll any lingering 401(k) funds into your IRA. You’ll fund your IRA from your personal bank account, so it’s easy to reduce savings when money is tight, or contribute extra when you get a tax return or holiday bonus.

One big difference between 401(k)s and IRAs is that you can contribute much more money ($22,500-$30,000) to a 401(k) than you can to an IRA, which limits you to $6,500-$7,500. Thus, if you have more money to contribute, you want to participate in a 401(k) if you’re able. If you can invest even more than the maximum in a 401(k), you definitely should open an IRA as well. But what kind? Traditional or Roth?

Traditional IRAs vs. Roth IRAs

With a traditional IRA, you contribute pre-tax dollars to your retirement account and pay taxes on the money when you withdraw it. With a Roth IRA, you pay the taxes up front, and then there’s nothing to pay later when you start making withdrawals. The biggest factor that influences an investor’s decision on which to choose is what tax bracket they expect to be in at retirement. Younger workers often opt for a Roth IRA because they expect to earn more (and get pushed to a higher tax bracket) down the road. The closer you are to retirement, the lower the odds that your tax bracket will change (although your personal financial situation may vary).

If you’re self employed, you may want to open a SEP IRA or a solo-k. These options can allow you to sock away much more than a traditional IRA — $66,000, plus $7,500 if you’re 50 or above.

Helping Everyone Save

At 401GO, you can open the IRA of your choosing within minutes. There’s no ream of paperwork, no waiting days or weeks for approval. 401GO is here to help more Americans save for retirement, and we do that by making the process easier. Whether you’re a millennial, Gen Xer, baby boomer or Gen Z, we can help you be better prepared in your golden years.

The post IRAs for Millennials: Planning for Retirement in Your 20s and 30s appeared first on Fast and Affordable 401k for growing businesses.

What Are You Looking For?

While this is a broad question, and you may think the right answer lies outside your area of expertise, it is still important to consider before you start your search. What made you decide that now is the time to consider sponsoring a 401(k) plan? Did your employees request it? Did you lose a few good employees to competitors that offered better benefits such as a 401(k) plan? Have you always wished you could do it but never thought you could afford it? 

Understanding your motivations will help you narrow your focus and better determine what you are hoping to achieve by making this change.

At the very least, compile some basic information about your workforce, such as how many eligible employees you expect to have and other important demographics such as their ages (how close to retirement they are can matter), their income (contributions are often done in percentages, and if you’re offering matching contributions, your employees’ salaries will help determine how much you pay out) and other relevant information.

If you’re near the 100-employee mark, maybe do an informal poll to find out how many employees would participate if you offered a 401(k) plan. Having 120 or more plan participants can trigger the need to perform annual audits, unless you go with a Safe Harbor plan. At the same time, depending on the type of plan you choose to offer, having high employee participation can be beneficial, since the more employees you have in the plan, the more you and your highly compensated employees can contribute to your own retirement savings.

It can be difficult for many small-business owners to determine ahead of time what type of 401(k) plan they want to sponsor. That’s because you may not know much about what your options are. Reading up on all of them until you are adequately informed could take months, and you want to put your time and effort into your business. At the same time, you don’t want to shirk the responsibility that comes with making decisions about your employees’ retirement plans.

One great option for quickly getting the information you need is to consult a financial advisor. If you don’t already have one, however, the search to find a good one might not be that different from your search for a 401(k) plan provider. What you definitely want — whether it’s a financial advisor or a 401(k) plan provider, is someone who knows their stuff.

How to Refine Your Search for a 401(k) Provider

The way many people make important decisions in life is by relying on their network for advice. Whether that’s work associations, personal friends, family members or others, getting a recommendation is a great place to start. While it can be useful to do research on third-party review sites, the information you get there should always be taken with a grain of salt. Dissatisfied customers are always more motivated to post than satisfied ones, and some people are always dissatisfied no matter what. When you start with a recommendation from someone you know and trust, you’re in a better position.

Once you get a few names, do your own background checks on the ones you like, seeing if they are properly certified and accredited, and if there are any complaints against them on sites like the Better Business Bureau. Check their ratings on review sites like G2, and dive into the details.

Like with any other selection process, set up appointments with the 401(k) providers you are considering. Be sure to ask about what types of plans they recommend for you based on your wants and needs for your company and employees — hopefully the answers will be about the same from each one, and you will get a better understanding of what is right for you. Then you can find out about what types of features and customization services they offer (such as investment options and fund choices), and this could be the clincher. Remember to ask about their cost and fee structure as well — administrative fees, investment fees and other charges can add up.

We offer a buyer’s guide to help you compare 401(k) fees — just ask!

Other Considerations with 401(k) Providers

You may also want to ask potential 401(k) plan providers about the type of technology they use and how easy it would be for you and your employees to use their features to manage your accounts. Additionally, you may want to determine the level of support you can expect to receive with respect to using mobile access, record-keeping and reporting, compliance and any other aspect of plan administration you may be concerned about.

Many small-business owners are drawn to 401GO because setup is so easy and fast, and administration is a snap. We have been around since 2018, and you can read about us in U.S. News & World Report, among other publications and review sites. 

Could 401GO be right for your small business? Give us a call and find out!

The post Choosing a 401(k) Provider for Small Businesses appeared first on Fast and Affordable 401k for growing businesses.

The Costs of Doing Business

When you first opened your business, you may have had to do without a lot of things you wish you could have had. These may have included better or larger quarters, the ability to offer more or better goods or services, and more employees to spread out the workload.

Let’s imagine you have an accounting firm. Maybe you passed your CPA exam and joined a large, busy firm where you worked long hours for little pay — helping rich people get richer. Perhaps you longed for a bigger slice of the pie, so after you got a few years of experience under your belt, you struck out on your own. Your business may have been just you, working in your garage with your mom’s help answering the phone. But after a period of time during which your clientele grew through word of mouth about your top-notch services, you were able to hire a full-time administrative assistant and some junior-level accountants.

At that point, offering benefits like health insurance and a 401(k) plan may still have been a dream to you. Your priorities at the time likely included a clean, nicely furnished and well-kept office, because it’s important to make a good impression on your clients. Additionally, you probably interviewed your employees carefully, choosing only the ones who were the most capable and worked well with your clients. You had to decide how much compensation to offer your employees. Too much, and it eats into your bottom line; too little, and they’ll leave to work for a competitor.

It’s the same process when you’re deciding what other benefits to provide. If other accounting firms offer 401(k)s and PTO and you don’t, you won’t get the best employees. You’ll get the leftovers.

Who Offers Matching 401(k) Contributions?

According to a study done by Plan Sponsor Council of America, a nonprofit trade association that supports employers that offer retirement plans, 98% of employers who sponsor 401(k) plans offer some type of matching contributions. The average matching contribution percentage is 100% up to between 4% and 6%, although some newbies may start at 50%. 

You may think you can’t afford that, but if you think about it, you really can’t afford not to offer it. Why?

1.       If 98% of businesses offer 401(k) matching contributions and you don’t, this will make you look stingy at best and financially unsound at worst. Potential employees may worry that a business that can’t afford matching contributions may not be around much longer.

2.       Not only does offering a 401(k) program attract better talent to your small business, it also encourages your employees to remain loyal to your company. That’s because employer matches are usually tied to a vesting schedule, often between two and five years. If your employee leaves before they are fully vested, they lose some of the money that you contributed to their 401(k). So employer matches and a reasonable vestment schedule help to encourage employee retention.

3.       Another reason employers want to offer matching 401(k) funds is that these contributions are tax deductible. How much your business is eligible to deduct is based on a number of factors outlined by the IRS. You can’t help but feel good knowing that the IRS deems your matching contributions tax deductible — plus, you’ll improve your reputation in the community and save money at the same time.

4.       Down the road, you may want to consider that as the company’s owner, you and any highly compensated employees you have would not be able to save as much in their 401(k) as they could with matching contributions in place. And that’s not just because the matching funds would otherwise be absent — it’s due to federal rules regarding how much owners and highly compensated employees are allowed to contribute in relation to other employees. Offering matching contributions up to a certain percentage provides an incentive for employees to save more — so you can save more too.

The good part about deciding to offer matching contributions to your employees’ 401(k) accounts is that you can start small and grow with your business. Maybe at first, you will opt to match 50% up to 3%. As your company gains more financial flexibility, you may be able to offer 100% up to 6%. Don’t make the mistake of thinking workers and competitors will not know which company offers what — topics like this are always popular for discussion, and not just at happy hour after work, but on social media as well.

For more information on how easy it is to start and manage a 401(k) plan at your company, contact 401GO today.

The post 4 Reasons You Should Offer Matching 401(k) Contributions appeared first on Fast and Affordable 401k for growing businesses.

Myth #1: You must be a big company to offer a 401(k).

Contrary to popular belief, you do not have to be a large company to offer your employees a 401(k) plan. 

In fact, with the rise of tech-enabled 401(k) plans and automated solutions, 401(k)s have become more accessible than ever before. This allows companies of any size to offer their employees a 401(k) solution, even those with just one employee. And having the ability to put away money for retirement is one of the most powerful components of financial security, so giving your employees access to a 401(k) plan can be a major win. 

Offering a 401(k) plan is an excellent way for companies of any size to start protecting their employees’ futures and ensure everyone achieves their desired level of financial success.

Myth #2: Offering a 401(k) is too expensive.

This myth exists for a good reason because many 401(k) plans used to be too expensive, and some plans still are.

But, with new streamlined 401(k) solutions that let you set up in minutes, automate paperwork, and leverage tech-enabled features, the cost is no longer a barrier for many small businesses. Tech-enabled apps and programs make setting up a 401(k) simpler and more efficient, allowing employers access to retirement plans with low-cost fees. Automation plays a big part in keeping costs down, providing an effortless way to manage these plans. 

With the addition of cost-saving technology, employers can now offer 401(k) plans without breaking the bank.

So don’t assume that offering a 401(k) plan is too expensive for your small business—there are many affordable options. 

Myth #3: Setting up a 401(k) is complicated and time-consuming.

Setting up a 401(k) can seem overwhelming and confusing, but there’s no reason to let it keep you from offering such a valuable benefit. 

These days, many 401(k) providers offer automated assistance online, providing fast and streamlined solutions for businesses of all sizes. With the help of these resources, you’ll be ready to start saving sooner than you think—taking a big step closer to a comfortable retirement for you and your employees. 

And while the setup time will range by provider, at 401GO, we offer a fast setup that takes most small business owners as little as 15 minutes. On top of that, most of our small business clients can spend just 10 minutes per year taking care of their 401(k) plan on an ongoing basis. 

Myth #4: Investment management is too complicated for small businesses.

Investment management can be a daunting task, especially for small business owners that don’t have experience selecting investment options.

Fortunately, outsourcing this task to experienced professionals is a cost-effective way to keep your investments strategically diversified and low-cost. By entrusting the expertise of an external financial consultant, you can seek advice on how to invest or manage your current strategies with minimal effort or risk. Investment management doesn’t have to be complicated; outsourcing is a viable solution that allows small businesses to maximize returns without overextending their resources.

At 401GO, we provide each plan participant with a guided portfolio builder to help them understand and select the appropriate investments for their situation. That means we will never shove employees into pre-built investment boxes but will guide them through building a customized portfolio to meet their unique needs.

Myth # 5: Small businesses can’t afford to offer matching contributions like larger companies.

When it comes to matching contributions, there are a couple of critical details to understand:

1. First, just because you offer a 401(k) plan does not mean you have to offer a company match. Matching can be optional depending on the type of 401(k) plan you select.

2. Second, if you do choose to offer a match, all matching contributions are deductible as a business expense, one of the many ways a 401(k) can help reduce your taxes. This can be an excellent way for owners to save money in taxes yearly while offering a valuable saving incentive for their employees.  

So, if you decide to offer a company match, remember: offering matching contributions is an affordable and effective way for small businesses to show their appreciation and care for the hard work put in by their employees. In addition, providing a company match is an excellent incentive that encourages employee engagement while helping to improve employee retention. Lastly, offering a company match demonstrates how small businesses value their staff just as much as larger companies do.

In the end, many small business owners mistakenly believe that 401(k) plans are too expensive or complicated to set up. However, plenty of affordable and straightforward options are available to small business owners. 

And don’t let the complexity of the process deter you—you can have a plan set up in as little as 15 minutes by selecting a tech-enabled provider like 401GO. And whether or not you decide to offer a company match, your employees will appreciate the value of having access to a 401(k) plan to secure their future retirement needs.

Remember, a small business 401(k) is a valuable addition to any workplace that can attract and retain top talent and provide peace of mind for years to come.

401GO stands out from the crowd.

At 401GO, we provide small business 401(k) plans powered by an easy-to-use platform. Our streamlined approach allows you to get up and running in just minutes with simple and affordable pricing to fit your unique business.

Want to know more? Contact us and we’ll answer all your questions.

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