Attract Top Talent: 10 Ways Small Businesses Benefit from Offering 401(k) Plans

Here are 10 reasons why small business 401(k) plans can greatly benefit your small business.

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6. Take Full Advantage of Indexing

While active fund managers will often tout the returns they maintain, over the long-haul passively managed, indexed mutual funds have beat their active counterparts by large margins, which gives account owners more money when they actually retire.

On the whole, indexed funds outperform. Small business owners will be better equipped for stashing away more for retirement by using a small business 401(k) that offers indexed mutual funds.

7. Benefit from Lower 401(k) Fees

Recent laws enacted by Congress now require administers of 401(k) plans to be more explicit on the fees they charge to clients. Much like credit card laws, 401(k) provisions now require regular quarterly reports on all 401(k) management and transaction fees. A difference in ½% in annual fees over the lifetime of a plan can mean the difference in thousands of dollars in lost interest revenue.

Thanks to new regulatory laws for increased transparency as well as technology increases, today’s fees for small businesses are just as low as their large counterparts who generally get better rates thanks to scale. In short, it’s a good time to be an entrepreneur with a 401(k) plan.

8. Say Goodbye to Annual Fees

If you sign up for a small business retirement plan that requires $1,500 to $3,000 in fees, you have been taken for a ride. The latest small business 401(k) plans only require the cost of fiduciary liability which represents and extremely low annual percentage fee. Such a fee is generally crystal clear and never amounts to more than 1.8% annually.

9. Beat the Curve

Unfortunately for most entrepreneurs (and people in general), retirement planning and healthy saving has not taken a top priority in their lives. Starting a retirement account for your small business will benefit yourself and your employees in such a way that your retirement will be greatly subsidized by much larger returns from a small business retirement plan.

10. Convert Later

Thanks to rollover laws, once an employee leaves your company (or if you close up shop), they are free to convert their 401(k) into an IRA and then utilize the IRA to invest in other potentially more lucrative assets such as real estate, tax liens, private equity (other small businesses like your own) and even franchises. Eventually the possibilities can be endless.

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Photo: Bloomingdales

Jon Castano is a retirement account advisor and online marketing specialist for Silverstone, an investment management, IRA & 401(k) firm located in Seattle, WA and Austin, TX.



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