By Ryan Velez
As a small business owner, you’re constantly being dragged in different directions regarding how to spend your time and energy. Oftentimes, this means that it can be difficult to plan ahead in the future. However, there are some items that are worth the extra effort. One example that a recent article from The Network Journal calls attention to is a retirement plan. While this may mean making an investment in time and money when you may have precious little of both to give, it is worth taking the effort to put together. Here are some of the major reasons why.
The first is intertwined with another struggle that small business owners are familiar with: finding employees. It can be difficult to bring on qualified employees you need in the face of wage pressures, and retaining them in the long-term can be even harder. While it’s often impossible for you to compete with the wage offerings that larger companies offer, a retirement plan is a way to try and level the playing field. It’s not unheard of for employees to pass on higher wages for an excellent benefits package. This may also add a potential plus for those looking to work for you, as they can roll over a plan from a previous employer if they wish.
On top of the benefits for employees, a retirement plan also has some more direct benefits for your business. In particular, there are several tax benefits that you can make use of. Employer contributions to the 401k plan can be tax deductible, and if these contributions accumulate, it can lead to some tax-free growth until there is a distribution. While these vary depending on the nature of the plan and how much is contributed, it’s safe to say that you will be able to save on taxes with a proper retirement plan.
Along with helping your businesses and employees, there is also a direct benefit to you as an owner. Many entrepreneurs don’t have a proper retirement plan of their own, with all their money going back into the business. The idea is that as they get older, they can sell the business and use that money to live on. However, with costs of living getting higher, and the future value of your business not being guaranteed, this is not an ironclad plan. To avoid working far longer than originally planned, develop a retirement plan and maximize your contributions, making for a multifaceted approach to retirement security.