Why Establish 401k Plans

I am setting up my own small home furnishing business for which I aim to hire about 10 employees. My business consultant tells me that establishing a 401k plan for my employees is a good idea. Why should I set up a 401k plan and how do I benefit from it-? Arnold P. Vaughn,
Sacramento, CA 95814

Arnold, your business consultant is perfectly right. Setting up a 401k plan for your home furnishing business is definitely a great idea especially in this post recession economic climate where people are quite keen on saving for the future. A 401k plan for your employees gives them the opportunity to save in a very effective way for their retirement years. Plus, there are some distinct advantages of saving with these plans. Two of the key aspects that make 401ks so attractive to employees are: tax benefits and employer contributions.

The contributions to the employee’s 401k are taken from his pre- tax dollars. This means that he ends up with lesser taxable earnings every year. The funds he has saved through his 401k plan are taxed only when he withdraws them, at which point he may fall in a lower tax bracket.

The fact that many employers make matching contributions to the employee’s 401k plan make these plans very attractive indeed. For the employee, the employer’s contribution is free money that lets him attain his retirement savings goal much faster.

For you, the employer, setting up a 401k plan is a great way to attract the most talented professionals in the market to your company, ensure their loyalty to the company and keep them motivated to put in their best for you. In addition, you get some tax benefits for the 401k contributions you make on behalf of employees. Given that setting up a 401k plan has become a simple and speedy process, thanks to DIY suites like http://401keasy.com, there is no reason for you to not have one for your small business employees.

About Elliot Earl, Director, Pension Trade Association
Director, Pension Trade Association Founded in 1982, the Pension Trade Association [California Domestic Nonprofit Corporation #C1629080] is dedicated to helping workers save for their retirement through expanded coverage of 401k -type defined contribution pension plans.

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