Feature-rich 401k at Affordable Cost

I run a small carpentry workshop at home. I want a 401k plan that is pocket friendly but gives me more than a bare bones version. In particular, I want good security and sufficient investment options. Am I asking for the impossible?-Alfred J. Ryals, 3912 Pleasant Hill Road, West Palm Beach, FL 33401

Alfred, you are definitely not asking for the impossible! In fact, you are just trying to make sure that you have a perfectly adaptable 401k that safeguards your savings in the best possible way. What you should look for is a plan that offers you a good choice of no- load mutual funds so that you effectively diversify your investment. In addition, you should also be ensuring that the plan you choose is not pricey when compared to similar plans in the market.

Today, there are many such plans available for small business owners like you. At http://www.401keasy.com/, you will find that ‘ultra low cost’ means no surprises in the form of hidden fees, commissions and asset-based charges. Since 401k Easy also gives you an unlimited choice of  no- load mutual funds to pick your favorites from, this could be the best option for you. Its 401k is feature packed and you are sure to find right here all the functionalities that big company plans usually have, with the bonus that you can get them all within your budget. Don’t hesitate to compare prices with other plans before you make your choice.

Another aspect to check when you are doing your comparison shopping is whether all the 401k suites on your ‘list of possibles’ give you great security features. The 401k Easy plan comes with secure online administration. This makes the plan doubly attractive because you don’t want sensitive personal information about your retirement savings strategy leaking out into cyberspace or among your competitors.

While you are at it, do check out if a demo version is available so that you can actually get a hands- on feel for the 401k suite. You can check for yourself if it is easy to use, intuitive and clutter free. Remember that you will need to update information on a monthly basis. A complicated 401k package will need a lot of time and effort-investment month after month simply to plug in the latest figures. That can get really tedious after a while and the extra complications only increase the risk of human errors cropping up. Go for simplicity, security and a good range of investment options.

Taking Loans from a Solo 401k

I run my own florist’s shop where the only employee is my wife. Can I set up a Solo 401k plan for my business that I can take a loan from in future? I do hire some help occasionally but have no other full time employees as of now.- Herman F. Stout, Pullman, WA 99163 

Businesses like yours that do not employ full time employees can set up a Solo 401k or Self Employed 401k, as it is also called. The fact that your wife is a full time employee does not prevent you from opening this retirement benefit plan. To all intents and purposes, the IRS considers your wife as a partner in your business rather than an actual employee.

You can take a loan from this account at a future date if you have a financial emergency. There are some stipulations and restrictions regarding taking loans in this way. A most important one is that you have to limit your loan to half of your account balance in the 401k account. Plus, the total loan should not exceed $50,000. When you repay the loan, the money goes back into the account and so does any interest you pay on the loan. In effect, through the Solo 401k loan you give yourself a loan and pay yourself back too.

Making sure that you do repay on time is very critical because you would end up paying penalties otherwise. If you fail to follow the loan repayment terms you may even end up paying tax on the amount you have withdrawn. A good way to keep track of your loan is to use a DIY 401k suite like http://runityourself401k.com/. With this software package it is an easy task to view your account status, get monthly statements as well as manage the account by just investing a few minutes of your time every month.

Employee Details Required for 401k

My friend runs a non profit organization and he recently set up a 401k plan for his company quickly and easily. I own a designer clothes shop in Harlingten. Can I set up my 401k the same way? What details about my employees will I need to collect to establish the account?- Misty Young, Texas.

Misty, setting up a 401k for your small business is pretty much the same as doing it for a non profit organization. Today, the entire process is very easy and it can actually be completed within a few hours at the most. You can sign up with a 401k provider like Vanguard or Fidelity to set up your plan. Most small businesses, however, prefer to use a DIY plan like http://lifecycle401k.com. These plans can be set up quickly right from the comfort of your home or office. You can manage the plan and carry out monthly updations in minutes and keep track of the plan easily too.

You also save a lot of money with such DIY plans because there is minimal administration cost. Your employees can keep tabs on their 401k account status easily with such plans too which makes it easy for them to switch investments or keep track of loans they have taken. Look for DIY suites that come with a demo so that you can try out the package before you actually sign up for it. Check if it is user friendly and if it has all the investment choices you want to include for your employees.

To set up the plan you will need to enter some information about your employees and also your company. For example, details of compensation drawn by them, their designation, the date of hiring and similar data will be required. You can decide if you want to make matching contributions and if so, how much, when you set up the plan.

Remember that you can always make contributions without specifying so in the plan document. Or, you can change your plan document later on to include employer contributions. If your business is just starting up then you may want to avoid committing yourself to a specific amount of employer contribution right away and simply add the provision later on.

Customizable 401k Plans

Why should I choose a 401k plan that offers customization? Where can I find affordable plans that can be customized? Marvin M. Huerta, Reeves, LA 70658, runs a bakery supplying home baked products to his neighborhood.

Marvin, a customized plan is the best choice when you want to set up a 401k retirement savings scheme for your small business. When you employ people, you cannot choose only those whose investment ideas match with the rest of your employees. Every employee will have a different savings plan and varying risk appetites. The same investment avenues may not be right for all employees. Giving your employees the freedom to invest the funds in their 401k however they please across a range of options that are suitable for them lets them control how and how much they save for their retirement. A customized plan lets you determine the kind of investments you want to make available.

Customization also gives you a great deal of control over what is and is not available for your employees. For instance, you can choose a 401k plan that does not allow loans if you want to ensure that your employees save the maximum possible for their retired years. You can even choose to do away with employer contributions if you want to opt for a performance related contribution rather than a fixed one.

There are a number of DIY suites available on the internet that give you customized 401k plans. These plans are by far the most economical ones you will find. Choose a tried and trusted one like http://smallemployer401k.com/ that has good reviews from users. Make sure that product support and pricing is excellent before you make your final decision to buy the 401k suite for your business.

Expenses Associated with Setting Up a 401k

As the owner of a women’s boutique, I feel its high time that I set up a 401k for my  employees. But before I proceed, I would like to know what are the expenses involved in administrating a 401k? Marcie Maughan, Tennessee

What you are doing is absolutely right- it is smart to understand the kind of expenses that go into setting up a 401k for small business owners. You must ensure that the fees you pay to your 401k service provider are reasonable in lieu of the quality and level of the services provided. As a thumb rule, 401k expenses can be widely categorized into administration fees, investment fees and individual fees linked to an optional feature of your 401k plan.

The administration fee is charged for all the daily administrative work associated with managing your 401k, such as accounting, record keeping, trustee services, legalities, and other aspects that go into administering your plan. Additional services such as investment advice, online transactions, or any sort of electronic access may also add to your overall fees. In some cases, these fees will be deducted from the return on investment, and in others they will be charged separately. For a one-time set up fee with no hidden charges, you can consider an online 401k set-up like http://small401k.com for your small business.

Investment management is one area that accounts for most of the expenses related to your 401k. A certain percentage of the invested assets may be charged for services that are investment-related. This is directly debited from the return on investment, and your net return is what you get after a deduction of the investment fees. Understand the expenses related to your 401k investment management to make an informed decision. Individual fees are charged for the optional features you choose when designing your 401k plan; this includes taking out a loan against your 401k or a participant investment choice. 

Offering No Load Mutual Funds with 401k

A friend tells me that the 401k plan I offer to employees should have a really good choice of mutual funds. Do employees really prefer such plans?- Robert S. Shoemaker, electronics shop owner in Bountiful, UT 84010

Robert, it is definitely true that more and more employees are showing a clear preference for mutual fund investment using the funds in their 401k plan. Mutual funds offer a great way for small investors like your employees to get some good returns. Plus, the fact that mutual funds are relatively low risk makes investing anxiety free for them. Because many people had their savings wiped out by the recession, you will find that safer investment avenues like mutual funds are more popular today.

Another aspect also makes these investments attractive to employees of small businesses. By investing in a mutual fund, your employee gets to participate in an investment that is managed by professionals and experts. Even if the employee himself is a novice when it comes to investing, he still benefits from the experience of the fund manager.

These are some of the reasons why employees like 401k plans that give them a good choice of mutual funds to pick from. If you have plans to set up a 401k for your employees, then you can opt for a DIY suite like the one offered by http://runityourself401k.com/. This suite not only lets you set up, manage and update the plan with the greatest of ease but also has a comprehensive line up of no load mutual funds from some top rated companies. Choosing a DIY package like this one gives your employees the freedom to quickly implement their investment decisions using the 401k funds. It is also easy to track a plan through monthly statements when you are using this kind of software to run it.

How Does 401K Make Your Business More Appealing to Employees?

Is a 401k plan really an attractive benefit for my prospective employees? Are there any other benefits I can offer that will help me find and retain the best talent in the market in a better way? Antonio D. Mercer, Martin, SD, runs a graphics firm

Experts say that most prospective employees consider an employer sponsored 401k retirement benefit plan one of the most attractive features when they are assessing employment offers. Other than health benefits offered by the firm, there is perhaps no better benefit you can offer that makes you a more sought after employer.

A 401k plan tells a prospective employee that you are a responsible and empathetic employer. The fact that you are encouraging them to save for future does a great job in boosting employee morale. Of course, this shows in your increased productivity levels too. If you have an employee contribution match option with your 401k plan, then the employee is sure to count this point as a real big plus in your favor. After all, any contribution match that you make into his account is free money where he is concerned. The tax advantage that the employee gets results in actual savings for the employee paycheck after paycheck.

Post recession, many small businesses that previously had no such programs, realized the importance of offering a safe and easy retirement benefit plan. If you are keen on adding such a plan to your business, the process is quite simple with the many ready to use 401k software suites available today. Check out the various options you have on http://401k-network.com/, where you will find a listing of the top rated 401k suites in the market today. These suites make set up, administration and updating of these plans simple and quick so that you just need to invest a few minutes each month to keep the plan going.

Roth 401k vs. Traditional and Roth IRAs

How does the Roth 401k compare with the Traditional IRA and Roth IRA? What are the advantages of a Roth 401k for my sweet shop employees? – Haydee J. Fries, Delafield, WI 

The Roth 401k is a very useful plan for an employer to offer his employees to ensure their future financial security. It was introduced fairly recently in the year 2006. When compared with the Roth IRA, both plans have several similarities. In both these savings plans, the contributions are made with after- tax dollars. That is, your employee makes his contributions into this account after paying tax on his paycheck. Because it is taxed at this time, the employee gets to withdraw funds from the account tax free in future. This is especially advantageous to those employees who stand a good chance of falling within a much higher tax bracket at retirement time. They pay less tax now on the contribution to avoid paying taxes on the same funds at a higher rate later.

In contrast, contributions to a traditional IRA are made with pre tax dollars. A part of the employee’s paycheck is directly credited into the traditional IRA before he pays tax on the rest. Since he has not paid tax on the funds in this account at the time of making the contribution, tax is charged at withdrawal time. For those who will have very little income post retirement, this could be quite advantageous. But since it is impossible to predict what your financial status will be at retirement time, many employees prefer the Roth version of the 401k where they can simply pay the tax right now when they have a regular income instead of worrying about it later.

You can read more about these plans and also compare a few 401k suites at http://401k-network.com/. Use a ready to use software suite like the ones listed here to make the set up and administration of your Roth 401k plan easy.

Nondiscrimination Testing with 401k Plans

I want to set up a 401k plan for my auto parts shop. Do I need to ensure that it complies with the nondiscrimination regulations year after year? Michael P. Ladd, Oklahoma City, OK 

A 401k plan is a retirement benefit plan that was created with the intent of allowing employees to save in an effective manner for their future. The many benefits and tax advantages offered with these plans are all established in line with this objective. This is also the reason why the government insists that these plans are offered to all employees irrespective of their position within your business or the total compensation they earn.

To get all the tax benefits that a 401k plan offers to participants, it should give benefits to all employees, including the rank and file staff. A plan that only benefits the business owner or top level management fails to pass theIRS’s non discrimination test. This test compares the plan’s participation as well as contributions made by rank and file employees with those of top level employees and the owner/ management.

Annual testing is mandatory for all regular/ traditional 401k plans to verify that they are non discriminatory. Through this testing it is verified whether the contributions made on behalf of rank and file employees is in proportion with that made for the top brass of your business.

If you want to avoid getting into the testing and verification loop then aSafeHarbor401k is the right 401k plan for your business.SafeHarborplans are exempt from the annual non discrimination testing that is required for the other 401k types. This plan has some inbuilt features that ensures that all employees are given equitable treatment when it comes to contributions.

Talk to an investment advisor to know more about Safe Harbor 401ks and the advantages they offer for your business. If you will be using a DIY 401k package like http://401keasyonline.com/, you can browse through their website or ask their support staff for help on setting up and managing aSafeHarbor plan.