Should You Fund a Retirement Plan for Your Employees?

It's definitely worth considering.

It's not easy being a small business owner -- namely, because you have to constantly compete with larger operations for talent. And those larger operations may have a lot more financial resources than you do to use for things for higher wages and better benefits.

Offering the right benefits package could help you both attract and retain talent. And so to this end, you'll definitely want to make sure you're giving your staff adequate time off and decent health insurance coverage, among other things.

But one benefit you may not be focused on is retirement savings. Workers who don't have a retirement plan through an employer can always fund an IRA on their own. And since that option exists, you may not feel compelled to offer up your own retirement plan.

However, IRAs aren't accounts that employers contribute to. And if you want to keep your existing workers happy while attracting new ones, you may want to consider funding a retirement plan for your employees if you have the financial ability to offer that perk.

The importance of helping workers save for retirement

When you offer retirement money as an employer, you send the message that you care about your workers' future financial well-being. You also send the message that you're willing to make an investment in your employees. And that's reason enough to consider funding a retirement plan.

Another thing to consider is that many workers can't afford to save adequately for retirement without help. So if you're in a fortunate enough position to be able to contribute to a retirement plan on their behalf, it's just plain a nice thing to do.

How to help your employees save for retirement

There are different options you can look at when it comes to funding a retirement plan for your workers. One is a 401(k) plan, which you may already be familiar with. The problem with 401(k)s, though, is that they can be expensive to administer. You'll need to compare different options to see if a 401(k) is viable for you.

Another route you can take is funding a SEP or SIMPLE IRA. These IRAs are specifically designed for self-employed individuals and small business owners, and they actually come with higher annual contribution limits than traditional and Roth IRAs. But both of these plans differ from a 401(k) in that there must be an employer funding component.

It's possible to offer workers a 401(k) plan that you don't contribute to. But you can't do that with a SEP or SIMPLE IRA. However, these IRAs may be less costly to administer, so that might free up funds for you to contribute to your employees' accounts.

These days, anyone planning to retire on Social Security benefits alone is likely setting themself up for disaster. If you're able to fund a retirement plan for your employees, do it. You'll send a message that you care about their future, and that you're willing to go above and beyond to keep them happy as your employees.