Boosting Your Business with 401(k) Plans:

Attract Talent, Save on Taxes, and Plan For Your Future

Offering a 401(k) retirement plan presents numerous advantages for business owners, enhancing both the company’s financial health and its appeal to current and prospective employees.

Attracting and Retaining Talent

In today’s competitive job market, a robust benefits package is crucial. A 401(k) plan serves as a compelling incentive for potential hires and encourages existing employees to remain with the company. Employees increasingly prioritize retirement benefits when evaluating job opportunities and providing a 401(k) can make a business stand out. This commitment to employees’ financial futures can foster loyalty, reduce turnover, and enhance overall job satisfaction.

Tax Benefits for Employers

Employers can deduct matching contributions to employees’ 401(k) accounts from their federal corporate income taxes, subject to certain limitations. These contributions are often exempt from state and payroll taxes as well. Additionally, small businesses may qualify for tax credits when establishing a new 401(k) plan, reducing the initial setup and administrative costs. The SECURE Act 2.0 has expanded these incentives, allowing eligible businesses to receive up to $5,000 in credits for startup costs for the first three years, plus additional credits for employer contributions.

Enhanced Employee Productivity

Financial security is closely linked to employee performance. By facilitating retirement savings through a 401(k) plan, employers help reduce financial stress among employees, which could help lead to increased focus, productivity, and overall job satisfaction. Employees who feel financially secure are more engaged and motivated, contributing positively to workplace morale and reducing absenteeism.

Competitive Advantage in the Industry

Businesses that offer a 401(k) plan are more attractive to skilled professionals compared to those that do not. A well-structured retirement plan can set a business apart from competitors, especially in industries where retirement benefits are not standard. This competitive edge can be particularly beneficial for small businesses looking to compete with larger corporations for top talent.

Self-Employed 401(k) Plans

For self-employed individuals or business owners without employees, a Solo 401(k) plan offers a powerful retirement savings vehicle. In 2025, participants can contribute up to $23,500 as an employee. Those aged 50 to 59 or 64 and older can make an additional catch-up contribution of $7,500, bringing the total employee contribution to $31,000. Individuals aged 60 to 63 are eligible for a higher catch-up contribution of $11,250, allowing for a total employee contribution of $34,750. As the employer, contributions can be made up to 25% of net earnings, with total combined contributions (employee and employer) not exceeding $70,000 for those under 50, and higher limits for those eligible for catch-up contributions.

A Solo 401(k) plan also offers the flexibility of both traditional and Roth contributions, allowing self-employed individuals to tailor their retirement savings strategy to their financial needs. Moreover, these plans can include loan provisions, providing business owners with access to funds in case of financial emergencies without incurring penalties.

Long-Term Business Growth and Stability

A 401(k) plan not only benefits employees but also contributes to long-term business stability. Offering a retirement plan can improve employee retention, reducing the costs associated with hiring and training new staff. Additionally, businesses with strong employee benefits programs often have better reputations, which can enhance customer trust and attract more business opportunities.

Implementing a 401(k) plan is a strategic move that offers substantial benefits to business owners. Talk with our financial advisors about what type of plan would best work for you and your company.