Why Set Up 401k Plans?

Why should I choose a 401k plan for my graphics design business? My employees can save with IRAs or other savings schemes. – Elizabeth R. Halliway, Stevens Point, WI 54481

The 401k plan became a very popular way for businesses to help employees save for their future once the changes outlined in the EGTRRA came into force in 2001. Since then this retirement saving plan has become particularly popular among small businesses. Businesses owners who have this plan give their employees a simple, effective and tax advantaged means of making sure of a financially secure retired life. This makes them great employers to work for. Result- the business can attract the best of the talent in the market. This is also one of the simple ways in which businesses make sure that good employees stay with them and don’t get lured away by bigger or better paying competitors.

While your employees can definitely save in other ways including IRAs, the 401k plan gives them some special benefits that no others do. One of the most attractive aspects of the 401k plan is that your employee’s contribution comes out of pre- tax dollars. Every month, his taxable income is reduced to the extent that he contributes to his 401 plan. This means that he cuts down his tax bill too. When he withdraws from his 401k account post- retirement he pays tax at the lower tax rate that he then falls within.

If you are setting up a 401k plan using a DIY software suite like http://401keasy.com/, you give your employees a great deal of control over their retirement savings too. They have the flexibility to choose their preferred investments out of a comprehensive range of options. This lets different employees invest in different avenues in line with their risk appetite and returns expectations. Since they can easily track the status of their 401k account, employees find it immensely convenient when you establish such a DIY 401k plan for your business too.

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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