retirement plan

10 Reasons why Small Companies Need to Set Up Company Retirement Plan

People often associate company retirement plans with large organizations with thousands of employees.

Now however, with changes in the tax code and law and improvements in technology used to help administer the plan, it’s possible for small companies to reap the benefits of retirement plans too.

Plans may include 401(k)s with or without matching contribution, programs that include profit sharing or defined benefit plans.

A highly qualified retirement services company can review your needs and put together and administer a plan that fully complies with all federal regulations and rules.

Helps with Employee Recruitment

In today’s competitive job recruiting environment, offering a retirement plan with tax benefits to the employee can be the deciding point in having a candidate take the job.

Future employees appreciate a small business that offers benefits typically found at a larger firm.

Improved Employee Retention

It pays to take care of your existing, hardworking employees by offering top-notch benefits.

When employees know they have a retirement plan they feel like ownership cares about them and are more likely to contribute even more to the success of the business.

Business Owner Tax Credits

As the owner of a small company, you are eligible for tax credits such as a tax deduction when you make contributions to your employees’ retirement plan accounts.

By starting your first 401(k) you receive a $500 tax credit each year for the initial 3 years of your business.

Retirement Account Tax Advantages

With a 401(k) you and your employees put money into the plan before taxes are taken from your wages.

These contributions and the associated return on investment are then tax sheltered until the age of retirement.

When money is withdrawn in the future, it will be taxed at the lower income tax rate that should be in effect then.

Matching Contributions are Possible

When you match a portion of your employees’ contribution to the plan, you receive a tax deduction for those payments.

As an owner who is also an employee, the matching contribution will also directly benefit you.

Profit Sharing Can Help Grow the Business

It’s possible to set up a plan that includes profit sharing.

This option allows you to contribute a percentage of the profits directly into the plan for each employee, which provides a strong incentive for everyone to help the company continue to grow.

Savings for the Future

Your employees work hard for your company and when you provide a retirement plan you are giving your employees a way to grow their savings for the future.

By deferring wages into the plan the employee builds their future nest egg, receives tax benefits and knows they will be taken care of when they reach retirement age.

Watching Their Money Grow

By directing their investments within the retirement fund, employees can reap substantial benefits through the compounding of dividends, investment gains and interest.

Compounding results in substantial growth in their funds within the plan.

It’s Easy to Outsource Your Retirement Plan

Improvements in technology solutions allow you to outsource your retirement plan setup and administration to a pension benefits manager.

These firms take care of all aspects of the retirement plan, from creation to employee signup to annual administration and tax filings.

Fees for Retirement Plans are Reasonable

With advances in technology, burdensome paperwork has been greatly reduced.

Retirement plan administrators can now provide their services at a reasonable cost and offer a variety of fund options that match your business goals and objectives.