How offering a retirement plan can help you grow your business
Endless opportunities for relaxation. Time to take up new hobbies. Feeling financially free with wide-open days. However you personally envision spending the autumn of your life, one of the cornerstones of the American dream is a secure retirement. After a long and dedicated career, people envision their golden years stretched out ahead of them, filled with leisure and a chance to enjoy what they worked hard for all their lives. That dream has become more difficult to reach over the past decades, but with a little bit of employer-sponsored help, it’s still possible to restore retirement to America.
Defined benefit plans have been slowly declining in popularity throughout the past few decades, bringing defined contribution plans to the forefront of the conversation. Offering an employer-sponsored retirement savings plan has many benefits, both to the employee and the employer—yet according to recent research, more than a third of employees don’t have access to an employer-sponsored retirement plan . And the statistics get even worse when the conversation moves to small businesses. In fact, employers with five to 24 employees are 91 percent less likely to offer a sponsored retirement plan than businesses with 100 to 500 employees . But why should this matter to you, the small business owner?
Benefits of offering a defined contribution plan to employees
As a small business owner, you’re probably already aware that implementing an employer-sponsored retirement plan can earn the business a credit on taxes, but the benefits don’t end there. Employer contributions are tax-deductible, assets in the plan grow tax-free, and flexible plan options are available for those who like to have maximum control. For employers, offering a 401(k) defined contribution retirement plan just makes sense.
Plus, in this day and age, many employees expect the opportunity to save in an employer-sponsored retirement plan. Finding qualified applicants for open positions can be a challenge for many small businesses, and offering a retirement benefit to applicants may make the difference between welcoming a new employee and continuing your search. Retirement plans are a key deciding factor—along with salary, time off, and health insurance—for many job searchers, and you don’t want to close the door on the perfect applicant just because your company is missing a common employee benefit. More and more business owners have learned that in order to attract and retain top talent, they’ll have to sponsor a stellar retirement plan.
If attracting new talent isn’t a top concern, maybe this is: a recent PWC survey found that nearly one in three employees have let personal finance issues be a distraction while at work. What’s more—46 percent of those who are distracted by finances at work report spending three or more hours per week thinking about or dealing with the issues . And it doesn’t even end there. The percentage of employees who report productivity at work has been impacted due to financial worries and the percentage of employees who report they’ve missed work due to financial worries have increased by seven percent and five percent, respectively, in just one year across multiple generations . So clearly, financially insecure employees aren’t just a hazard to themselves—they’re a hazard to the business too. And as a business owner, you have the unique ability to combat this issue and make a profound difference in employees’ retirement outcomes all at once.
How to start a small business 401(k)
So now that you’re sold on the benefits of offering a retirement savings account to your employees, where do you even begin? Working your way to becoming a retirement plan sponsor can be easier than you might think. The government wants to help businesses make retirement plans available to people, so regulations continue to make the process easier and more straightforward.
A growing number of employers, especially smaller businesses, are entering 401(k) country for the first time. More than 90 percent of new retirement plans started in recent years have been defined contribution plans, and of these new plans, 79 percent were for small employers with fewer than 100 employees .
Elementary economics teaches that demand is the driver of supply. In other words, the path to success lies in finding a need and filling it. The need in this situation is clear, and as a business owner, you are poised in a perfect position to help fill that need—and in the process, grow a successful business! Restore retirement and reap the rewards!