Retirement Plans and Retirement Planning for the Small Business Owner

Pros and Cons of Retirement Savings Plans for Small Businesses

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Learn about the Pros and Cons of Retirement Savings Plans for Small Businesses.
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There are many benefits and downsides to owning your own business – flexible retirement planning can be a big benefit. However, too many business owners neglect this financial planning task for the more pressing day to day needs of their business.

The Cons of Retirement Plans for Small Businesses

Depending on the size of your business, the biggest drawback for offering a retirement plan is that these plans can be costly, time consuming and complicated. As a small business owner you need to balance the needs of your business against so many competing priorities. There are many ways to use your time and resources.

However, there are many high quality alternatives to plans with high costs and complexities – especially if you have fewer than 100 employees. And, if you are a sole proprietor or self employed, there are very affordable retirement plans for you.

The Pros of Retirement Planning for Small Businesses

The advantages of retirement planning for a small business owner are both long and short term:

  • Secure Your Retirement: Achieving retirement security is the most important long term goal of retirement savings.

    Many small business owners believe that the sale of or other exit strategy for their business will be enough to fund retirement. In fact, only about 16 percent of businesses with less than 50 employees have 401k plans. (What percentage of businesses ultimately get sold?)

    However, it is probably not wise to bank on an exit strategy to fund retirement. After all, most business owners know that every wise owner has a Plan B. Saving for your retirement should be an important priority and an essential part of your overall financial goals.

  • Save Money on Taxes: Most people think of retirement planning as a long term wealth management solution. However, there are yearly benefits to investing in a retirement planning solution. The biggest short term benefit is tax savings.

    Qualified retirement contributions are tax deductible. And both the biggest and smallest small businesses can reap the benefits.

    • A sole proprietor with modest yearly income might drop into a lower tax bracket with a Retirement Plan contribution.
    • While a large firm with sizable revenue – could reap significant tax savings with the right benefits plan.
  • Many Different Options are Available: Whether you work for yourself and make a modest income or have lots of employees and a large budget, there is probably a retirement planning product available to fit your exact needs and goals.

    And the really good news is that the wide variety of plans and the competition between firms to earn your business mean that:

    • The types of investments available are wider
    • The costs of these plans are getting cheaper
    • The complications of running the programs are getting simpler.

    Continue here to learn more about which Retirement Plan is best for you and your business.

  • Can Help You Attract and Retain Employees: Employees are more and more aware of the benefits of retirement planning. And many of the brightest workers know to look for retirement benefits as an important part of their overall compensation package.

    A company Retirement Plan can help you hire and – perhaps more importantly – retain the best employees.

    A study published in National Small Business Week reported that the overwhelming majority – 80 percent – of small businesses who offer Retirement Plans believe that they help with employee retention. And, 76 percent of respondents feel that a Retirement Plan helps attract new employees.

  • Back Up Savings Plan: In addition to enabling you and your employees to save for retirement, money in your retirement account can act as a back up savings plan. In general, retirement savings plans can be borrowed against – up to half the value. You pay the money and interest back to yourself over time.

    This is a good resource to have in an emergency – you can save for your retirement as well as for the proverbial “rainy day.”

  • Get Liquidity: Some company retirement plans – like an employee stock purchase plan – enable the company to raise funds for the business or the owner since the employees are buying the stock from the business.

Do You Have a Retirement Plan? Is it Adequate for You, Your Family, Your Business and Your Employees?

While many people think that they have adequate resources for retirement, few actually do. A recent study found that 45 percent of all U.S. households have less than $25,000 in savings excluding their home), yet two-thirds of all workers expect to live as comfortably in retirement as they did when they worked. The reality is that the average person would use up that $25,000 in just a few years – even with their Social Security benefits.

Longer life spans, increasing medical costs, fluctuations in financial markets and other pressures are making significant retirement savings ever more important. And, Small Business Owners are in a unique position to create a tax efficient plan tailored to their needs and goals.

Connect with a Small Business Retirement Planning Expert

Continue here to speak with a Small Business Retirement Planning Professional who can help you find the right plan for you and your business.

Get Matched with the Right Retirement Advisor for Your Small Business

Find the Best 401k, IRA and Other Products to Improve Your Tax Efficiency, Employee Rentension and More