For most small business owners, managing day-to-day operations is a full-time job. Keeping the business running smoothly, handling employees and staying competitive can make it difficult to focus on long-term strategies and their own financial future.

Busy business owners are always looking for tools that will solve multiple problems at once. That is why it’s a good idea to review whether their retirement plan is right for their business. Retirement plans can keep a business competitive while hiring, improve the owner’s financial future, and help save on taxes.  

Retirement plans have become an essential benefit for attracting and retaining top talent. In today’s job market, employees are not just looking for a paycheck but are seeking stability and long-term security.

Offering a retirement plan helps small businesses compete with larger companies when it comes to hiring. It also helps retain loyal employees, who may otherwise be tempted to look for opportunities elsewhere.

In many cases, employees are more likely to stay with a business that offers this crucial benefit, fostering long-term loyalty and reducing turnover.

Retirement plans provide personal benefits for owners as well. Just as employees use these plans to save for their future, owners can do the same.

Tax advantages

Business owners can contribute to their own retirement through the plan, building their personal wealth in a tax-advantaged way. This is particularly important for owners who may not have time to focus on personal savings while running the day-to-day operations. By setting up a retirement plan, they can grow their own retirement savings while ensuring their employees do the same.

From a tax perspective, retirement plans offer significant advantages to both the business and its employees.

Contributions made by the business to employee retirement plans are typically tax-deductible, reducing the company’s taxable income. Additionally, small businesses may qualify for tax credits that help cover the costs of setting up and administering the plan. This can make the decision to offer a retirement plan not only a strategic one but also a financially sound choice for the business.

Setting up a retirement plan requires careful planning and thoughtful execution. Business owners should work with a professional to choose the right plan for their goals, whether it’s a 401(k), simplified employee pension IRA, simple IRA or a cash balance plan.

Business owners should surround themselves with experts who can guide them through the process, from selecting the plan to managing contributions and handling administrative tasks.

By partnering with a professional, small business owners can ensure that their retirement plan is structured to meet their goals and remains compliant.

For many business owners, establishing a retirement plan is more than just a benefit – it’s a strategy for attracting talent, growing personal wealth and ensuring the company’s long-term success. With the right plan in place, both the business and its owners can look forward to a more secure future.

Stuart Gillin, a certified financial planner, is an assistant vice president, family advisor and investment advisor at Baker Boyer Bank in the Tri-Cities.