Are There 401(k) Plans for Small Business Owners?

BenefitMall is proud to be able to offer our clients forward-thinking, creative retirement solutions that provide an essential benefit to employees. We partner with a best-in-class retirement services company to offer innovative and creative retirement plans to meet the needs of small businesses. But what about small business owners?

Surprisingly, there are quite a few small business owners that don't have their own retirement plans in place. Many of them run extremely small companies with fewer than 20 employees. As such, they may not even have 401(k) plans in place for workers. As for themselves, they are relying on their businesses to support retirement.

In a recent article published by Forbes, contributing author and financial expert Kerry Hannon referenced a BMO Wealth Management survey that suggested as many as 75% of small business owners had put away less than $100,000 for retirement prior to age 64. According to Hannon, small business owners are hoping their businesses provide retirement income in one of two ways.

The preferred method is to pass on the business to a child or grandchild in exchange for monthly income paid as a percentage of profits. If there is no one to pass the business on to, the second option is an outright sale. The small business owner can then use the proceeds to establish retirement investments.


Saving Outside of the Business

Though many small business owners successfully execute an ascension plan that results in adequate retirement income, it is still a risky strategy. What happens if passing on the business doesn't provide enough monthly income? What happens if a sale produces far less cash than was anticipated? The fact is, small business owners should be saving outside of their businesses to increase the chances of a comfortable retirement. That's where 401(k) plans come in.

Small business owners have different 401(k) options:

  • Solo 401(k) - This kind of retirement plan is intended for self-employed individuals and companies employing no workers outside of immediate family. The business owner can contribute up to $54,000 annually ($18,000-24,000 depending on age through their own elective contribution and up to 25% of compensation through the Employer non-elective contribution).
  • Small Business 401(k) - A customized 401(k) for small business. According to Hannon, there are a number of financial services companies exclusively targeting small businesses for their 401(k) plans. The idea here is to custom tailor plans to meet the unique needs of each company, thereby making money through volume rather than offering only generic, high-priced plans. Annual contributions for 2017 are limited to $18,000 for those under age 50, and $24,000 for those 50 and older.


A Benefit You and Your Employees Deserve

We work with all kinds of businesses in virtually every sector here at BenefitMall. One of the more important things experience has taught us is that a 401(k) plan is a benefit both small business owners and their employees deserve for years of hard work and dedication.

As a business owner, you put a lot of time, effort and financial resources into your company. You may not pay yourself a substantial salary because you put the money you make back into growing your business. That's great. But don't you deserve to reap some of the financial rewards of your hard work in retirement? Yes, you do.

Is our BenefitMall 401(k) plan right for your company? We invite you to contact us today to learn more by calling 844.769.8990 or requesting more information here.


Forbes –