A recent Wall Street Journal article discussed how major players like Microsoft Corp. and Host Hotels & Resorts are taking steps to boost contributions to company 401(k) plans, because some workers aren’t saving enough. While many organizations have resisted such a move, there is renewed interest as a means of attracting talent, motivating the current workforce, and helping aging workers to retire on time.
A natural consequence of lack of retirement planning is that a large percentage of older workers are not ready for retirement, which means that they will stay in the workforce longer, which in turn translates into increased healthcare costs for their companies.
There is hope, however: according to Vanguard Group’s workplace retirement data, the average contribution of employees’ salaries have increased for those companies who do offer 401(k) or another tax-deferred retirement plan.
Even so, the average American still isn’t saving enough. While the exact cause is still uncertain we know that there several factors that may contribute to the issue, including businesses not offering retirement plans, complex eligibility rules set by employers, a lack of effort from the employer to sign up those who are eligible, and financial strain, to name some of the most common.
So what can you, as a small business owner, do to save for retirement, continue to attract and retain talent, and also help those who have been in the workforce longer to retire on time?
- Pick a retirement plan that fits your business. Not all plans are created equal, meaning that they come with varying specific benefits and requirements, and one may be a better fit for your business than the others. It’s important that you don’t blindly choose a plan, so be sure to find a provider that will take the time to help you understand the plans that are available to you.
- Establish flexible eligibility rules – for example, you may want to offer 401(k) plans to employees immediately upon employment as this will reduce your employee income tax (the tax deferred savings for your business).
- Start with yourself. Start saving right away!
- Take the time to educate your employees on the retirement plan that you decide to establish for your business, and put in the time and effort to enroll eligible employees.
To learn more about retirement planning options for your small business, register for our upcoming webinar Strategies to Maximize Your Retirement and Tax Savings in 2017.