Manage and lower income taxes for owners

One of the primary benefits of a 401(k) plan is the ability to lower your income taxes by saving for your retirement. Depending on the specifics of your company, a retirement plan can be structured to allow well over $100,000 of annual income to be shielded from taxes for a married couple.

And for companies with employees, even greater tax benefits are available when incorporating a retirement plan into a total compensation package.

Shield Assets from Potential Lawsuits

ERISA-qualified retirement plans have the strongest liability and creditor protection available under law, taking a portion of your personal wealth and effectively locking it out of the reach of a potential future lawsuit. This federal asset protection can be one of your most important benefits of establishing a retirement plan because, as a business owner, you are subject to an increase risk of lawsuits.

Increase Company Revenue & Employee Engagement

A well-supported retirement plan can actually increase revenue for your company. Companies on average experience a 3% growth in revenues when employee engagement increases by 5% according to an AON Hewitt study titled 2015 Trends in Global Employee Engagement. And employees with a retirement plan are 5x more likely to be engaged according to Towers Watson.

To further increase employee engagement, we provide free financial education and annual advising to employees as part of our retirement plans. These and other financial wellness programs have been proven to engage employees, increase retention, and provide other financial benefits to companies.

Secure Your Retirement

As a business owner, retirement doesn’t mean quitting your job, it means leaving your baby. A properly structured retirement plan can lay the path to allowing you to retire without being forced to sell or fully leave the business.

If you have a goal of retiring early, we can help create a retirement plan combined with other financial plans to let you retire when you want to; regardless of whether you company happens to be growing or in a temporary slump.

Avoid Estate Taxes when Passing the Company To Children

If passing your company to your children is an important part of your legacy, don’t let the Federal Government walk off with a major portion of your business. A plan can be created to keep you in control of the business while simultaneously transferring ownership to children with no estate or gift tax consequences.

retirement plans can also accomplish a other goals including:

Fund Business Growth: Many financial advisers push the advantage of diversifying investments out of your business, not realizing the best investment you can make might be investing back into your own business. While we generally don’t recommend having your business stock as a 401(k) option, your retirement plan can be structured to allow you to borrow from yourself to invest in business growth opportunities.

Sell The Business to Employees: If your company has employees, you can establish a retirement plan that allows you to cash out a portion of your business ownership while simultaneously funding employee retirement. And if done correctly, your company can take a tax deduction for establishing an Employee Stock Ownership Plan.

Create Incentives to Increase Company Profitability: Even if you don’t want to give up ownership in the company, retirement plans can be created to encourage employees to act like owners either through contributions based on profitability or through sharing in the increasing value of your business.

Why big provider Fees are Likely Higher

Retirement plans have often been a cash cow for the national companies that provide them. And the ‘advisers’ at big brokerage companies and insurance companies are legally sales representatives charged with maximizing profit for their employers. Only Registered Investment Advisers are required by law to act in the best interest of their clients.

Conflicts of interest abound when the adviser on the plan is an employee of the same company that custodies the assets, provides the investment options, and acts as the record keeper and administrator of your plan.

While all-in-one shopping might seem convenient, the lack of checks and balances allows for profits to be buried throughout the retirement plan in the form of investment expense ratios, sales loads, 12b-1 fees, commissions and other hidden compensation.

Not only do advisers on plans often charge fees well in excess of what a financial adviser typically charges, the adviser’s recommended investments often includes their own company’s mutual funds, annuities, and ETFs. And advisers often earn bonuses for increasing the profitability of your plan for their company.

Why Lower Fees are Important

Aside from the obvious benefit of saving your company money, lower fees also increase the retirement benefit to you and your employees and reduce the likelihood your company will be sued over the plan.

If your plan fees cost more by just 1% of the plan assets, the higher fee can have a dramatic impact on retirement balances when you retire. As an example: assume you contribute $500 per month to your 401(k) and the plan earns a 9% average return over 35 years. With a fee of 1% of assets, you would have $1.15 million in your account at retirement. But if the plan charges a 2% fee, your account balance drops by a quarter million dollars.

This significant impact is one of the many reasons 401(k) lawsuits are on the rise. And sadly, many of the biggest 401(k) providers in the country are being sued by their own employees because of the high fees they charge in their retirement plans. Even as your adviser is telling you how great the provider’s 401(k) plan is, they may be suing the provider for the high fees the company has in the plans.

Additional RESOURCES & ARTICLES

• 401(k) Lawsuits: What are the Causes and Consequences? - by Boston College Center for Retirement Research

• Meeting Your Fiduciary Responsibilities - by the U.S. Department of Labor

• ‘Shame on Them.’ Fund Companies Got Sued By Their Own Employees Over Pricey 401(k) Plans - by Barron’s

• What You Should Know About Recent Trends in 401(k) Fee Litigation - by ERISA attorneys for BankDirector