So, you’re running your own show, juggling a million things, and still making it all look easy. But let’s take a quick break from the hustle to chat about something super important for you and your employees: retirement savings. Trust me, it’s not as intimidating as it sounds. In fact, a 401(k) plan can make your employees happy, generate tax savings, set you up for a secure financial future, and deliver several other benefits that will make you wonder why you didn’t get started sooner.

What’s a 401(k), Anyway?

A traditional 401(k) is a retirement savings plan that lets you invest a portion of each paycheck on a pre-tax basis. “Pre-tax” means your retirement contributions are taken out before calculating income and payroll taxes on your earnings, so contributing to a 401(k) lets you accomplish two goals: saving for the future and lowering your tax burden today.

As a business owner, you can offer a 401(k) plan to help employees (and yourself) stash away money, grow it over time, and have a nice nest egg for those golden years.

Benefits of 401(k) Plans

A 401(k) plan offers several benefits for businesses and employees. Here’s why you’ll want to consider setting one up.

Tax Benefit 1: More Money in Your Pocket

As mentioned, traditional 401(k) contributions are made with pre-tax dollars. This means the money you put into your 401(k) reduces your taxable income, and money in the account can grow tax-free until you withdraw it. Less tax now means more money working for you.

Tax Benefit 2: Business Deductions

Employers that offer 401(k) plans and other qualified employer-sponsored retirement plans to employees can deduct the cost of setting up and managing the plan.

In addition, if you match your employees’ contributions, you can deduct those matching contributions from your business income, reducing your taxable income.

Tax Benefit 3: Tax Credits

If you own a small business, you can claim a tax credit worth up to $5,000 per year for three years.

The Retirement Plans Startup Costs Tax Credit is available to businesses with 100 or fewer employees. It’s designed to help offset the costs of setting up a plan and educating employees about it. If you add an auto-enrollment feature to the plan, you can claim an additional $500 tax credit.

Employee Attraction and Retention: The Ultimate Perk

Imagine this: You’re trying to hire a stellar candidate, but they received a job offer from a competitor. The other company offers a competitive salary, but you offer a competitive salary and a 401(k) plan. Who do you think your dream employee will choose?

Offering a 401(k) plan makes your business more attractive to top talent. Plus, it shows you care about your employees’ future, which boosts morale and loyalty. Happy employees = happy business!

Generous Contribution Limits: Bigger Is Better

One of the biggest perks of a 401(k) is the generous contribution limit. For 2024, you can contribute up to $23,000 to a 401(k). If you’re 50 or older, you can contribute an extra $7,500. That’s a whopping $30,500 you can stash away each year.

Now compare that to an Individual Retirement Account (IRA). For 2024, you can contribute up to $7,000 to an IRA ($8,000 if you’re 50 or older). While an IRA is still a fantastic tool for retirement savings, when you stack it up against a 401(k), you can see why a 401(k) is a superstar for serious savers.

Borrowing from Your 401(k): A Safety Net If You Need It

Worried about stashing money in a retirement account you can’t access until you retire? Don’t worry: you might be able to borrow from your account when life throws you a curveball.

Many 401(k) plans allow participants to take out a loan from their retirement savings. You can usually borrow up to 50% of your vested account balance or $50,000, whichever is less.

Unlike a traditional loan, borrowing from your 401(k) means borrowing from yourself. You don’t need a credit check, and the interest you pay on the loan goes back into your own 401(k) account.

Of course, the money you borrow isn’t growing in your 401(k), which can impact your retirement savings over time. Still, it’s nice to know you have that option if needed.

Student Loan Payment Matching: A New Perk for Employees

Student loan debt can be an overwhelming financial burden for your employees. They might think they can’t afford to contribute to a 401(k) — or take advantage of matching contributions — until they get out of debt.

A new feature can change all that. The SECURE Act 2.0 allows employers to treat employee student loan payments as if they were 401(k) contributions and make matching contributions into the employee’s retirement account.

This is a new feature for 2024, but big employers rushed to add it to their 401(k) plans. This goes to show that this is an employee benefit that many workers will value highly.

Easy Setup and Management

Setting up a 401(k) plan might sound like a daunting task, but there are plenty of resources and providers that make it a breeze. Many offer easy-to-use platforms where you can manage everything online and even automate many aspects of administering the plan. Plus, they’ll help you comply with all the rules and regulations. Stress-free setup? Yes, please!

Let’s Make It Happen!

Ready to bring some financial magic to your business? Setting up a 401(k) plan is a fantastic step toward a brighter future for you and your team. And remember, you’re not alone in this. There are plenty of experts ready to help you navigate the process.

So take the leap and add a 401(k) plan to your business toolkit. Your future self will thank you, and your employees will think you’re the best boss ever. Now, that’s what we call a win-win!

Got questions or need a bit more guidance? Don’t hesitate to reach out. We’re here to help you every step of the way.