Why Every Small Business Needs a 401(k)

Lately, the number of small businesses that offer retirement plans like the 401(k) to their employees has been on the decline. This is mainly because of budget limitations that make them worry about even the smallest costs.

Silver and GoldOf course, if I was a small business owner, I’d be worried about these expenses as well, but I would also try my best to maximize profits by keeping my employees happy and motivated.

As an employee myself, I know I would enjoy the choice of having a retirement fund set up for me in my place of work, so that I could be far more motivated to work better and make my retirement one that is absolutely worth having.

Affordability is Key

One of the most common things that a small business owner will ask from themselves is what kind of plan they need to get to minimize costs. For example, you could go for something like a silver IRA instead of the 401(k). A common misconception in the industry is that the gold and silver IRA is a cheaper option.

However, if you have really done your research on how to get started with a silver IRA investment, you will have found out that the 401(k) is the less expensive option. You will probably have to pay less every month than you do for your phone bill. In addition to this, your company won’t be taxed as much.

Happy Employees = Happy Accounts

If you offer your workers a retirement plan, it will show them that you truly care about them. This means that your prospective partners and customers will feel safer around you, because they know that you and your small business are one of the “good guys”.

It is a nice thing indeed when my employer shows me that they care about my future after I am done working for them. You could make your workers feel the same, and minimize your expenses too. Because when you have a retirement plan in the workplace, employees are more motivated to stay on for the long-term!

No More Paperwork

The 401(k) is usually a far more flexible retirement plan than a normal IRA. There isn’t much required in the way of planning because the account is very easy to set up. Because of this, a lot of large and small corporations use this plan instead of others. Since only cash flow is involved, it should fit right into your accounts without hassle.

Try to offer your workers benefits like assisted rollovers to IRA accounts as well. Indeed, if I were given the option of choosing between retirement plans, and I were offered company help to allow me to make this transition easily, I would definitely look forward to working at my maximum level of efficiency in the future!

Low-Cost 401(k) Method

There isn’t much in the way of overhead costs when it comes to running a 401(k) for a small business. The entire system can be run by a simple online database, allowing for far lower management costs as well as improved access to employees who want to check on the status of their plan.

Based on these points, the 401(k) retirement plan is the most suitable option for small business owners since it saves time, money and effort to a great extent. You could improve the happiness of your employees, and maintain a great work environment at the same time.

 This post was sponsored by Lear Capital.

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.


  1. I would disagree from nearly three decades of experience in serving small business owners and employees. Why? Several reasons beyond the affordability of 401K plan. Last month a doctor office’s manager called me about starting up another 401K plan as they had one several years back. I asked why they thought they needed one? “Well don’t our employees need one” the reply. I asked her to ask the employees and they responded no we do not need it we save and prefer to save in ROTH IRA and your paying us well- they are paid well.
    Another reason for not starting a plan is litigation is increasing in this area faster than most other legal issues. Too expensive of plan, not enough supportive advice, choosing the wrong investments, too watered down or averaged investments like target date funds, not enough matching dollars to trade current money to future savings and on and on the list goes.
    Other feedback from office managers have covered softer issues of flex scheduling for employees to be at school events for children, the incentive trips and bonus structures are more inviting than 401K plan is to work hard and perform and be recognized by employees reported to me. Only saying as one in the conversation with employers and employees.
    Most of the litigation can be mitigated by installing a Section 3(38) plan that complies with fiduciary standards and allows the Fund manager to take on the liabilities of the plan. There is a lot more to 401K discussion than cost effective and hard assets choice for the plan to consider.

    • Thanks for taking the time to leave a detailed comment, Scott … you give other readers a lot to consider. While I will likely comment more later, I’m in the middle of a flight pounding out this response on my phone and I’ll keep this first comment short. You note that employees note, through employers, that they prefer Roth IRAs. I’m somewhat skeptical of that claim by employers. While I love Roths, the reality is that significantly less ($5,500 or $6,500 [with catch up contributions] vice $18,000 or $24,000 [with catch up contributions]) can be contributed to such plans. If the employees are sophisticated enough to know about Roth IRAs, I suspect they would know of the significant contribution limits and the potential impact of those limits – and any matching – over a number of years.

  2. I am so thankful for my company 401k, and I agree that once your company begins to expand beyond 1-2 employees, a 401k is a must- well compensated employees make more profitable companies, and a 401k has become one of the most important parts of excellent compensation.

    • No doubt that the defined contribution plan – the 401(k) for most people – has become a critical part of the compensation package and the centerpiece of the retirement portfolio for most people. Thanks for taking the time to stop by and kick off the conversation, Hannah.

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