You & Your Money

Why Now Is A Great Time for Business Owners to Start a Retirement Plan

September 13, 2023 Weiss, Hale & Zahansky Strategic Wealth Advisors Season 2 Episode 35
You & Your Money
Why Now Is A Great Time for Business Owners to Start a Retirement Plan
Show Notes Transcript

Small business owners, did you know that offering your employees a retirement savings plan can benefit your company? 💡💥

 Here's how you can get started with some insight provided by Jim Zahansky, AWMA®.

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Welcome to You And Your Money. Empowering you to reach your goals with tips to help you Plan Well, Invest Well and Live Well. I'm Jim Zahansky, principal managing partner and chief gold strategist at Weiss, Hale and Zahansky Strategic Wealth Advisors. Now on to today's topic. All right. So let's get into today's topic. Of course, we all know the benefits of having having a retirement plan for ourselves, but many small business owners might not be aware that there are advantages to offering a retirement plan as well. So let's talk about the benefits of offering that for your employees. Yeah, I mean, first off, when you're thinking about as a business owner and you're listening to the show, I mean, all of us have made decisions of when to add talent to your team. When when do you need a role? And over the last few years, it's been an arms race in terms of what we're paying people, what we're offering them. You know, talent and employment is really tough to come by. So as a business owner, when you think about it, first off, you know, should I add a retirement plan? In many cases, depending on the size of your business, it's almost a given and an expectation. And so you're sort of attracting and retaining talent that way. In addition, you know, there's been as policymakers, Congress and others, think about ways to encourage people like business owners to offer retirement plans and people to save in retirement plans. There was some legislation that was included in the Secure 2.0 Act, which was introduced at the end of 2022. This offered some credits in tax credits, which I'll get into a minute in a minute. In relation to employers offering retirement plans. So there's some also some tax benefit perhaps if you don't have one in place right now. All right. Let's drill down on Secure 2.0 and tax credits that are offered for small business. Yeah. I mean, often in hindrance when I talk to business owners or why they don't have a retirement plan is, you know, there are some start costs. It also costs money to monitor the plan. You have to file certain filings, you know, with the government to be sure that you're practicing fair tax in the way your savings in your retirement account. So you know what, the Secure 2.0 tried to do, which was signed into law last year by President Biden, is provide tax credits for small businesses that they try to you know, anyone who is initiating a retirement plan for their employees allowed businesses with up to 50 employees to receive tax credits for that, specifically for the start up costs and for the contribute. So the credit can cover up to 100% of eligible start up costs or 5000 per year for the first three years of the plan. So sort of an ongoing incentive for companies that, you know, are smaller, that are looking to start retirement plans and get in the game of giving those benefits to their employees. Let's elaborate on auto enrollment tax credits and its potential benefits. Yeah, so that's another potential tax credit. So again, auto enrollment, a feature in retirement plans that essentially says, hey, you're my employee. When you get hired, you're automatically enrolled in the 401. K, And by the way, you're going to automatically have some money taken from your paycheck and put into it. The idea is to incent the employee to save, and a lot of employers will even match that. So, you know, that's that's what auto enrollment is. And so the government saying, hey, put this feature in your plan and we're going to give you a tax credit, which I think is up to $500 for implementing that automatic enrollment feature. When you start up the 401k. All right. Again, great incentives for businesses. Let's talk about timing. Why is it why is starting a retirement plan on July 1st at. January 1st? That is advantageous. Interestingly, you said July 1st because either could really work. You know, January 1st is optimal in a lot of ways. So we said sitting here in early September, if you're thinking about really starting one or adding one to your two to what you're offering your employees, you really should be doing it now. It takes some time. It takes some time to set up. And so when you think of January 1st, there are several benefits. The first is, is that employees from a record keeping point of view can have a full year of contributions and maximize their potential. And so it's sort of a cleaner accounting purpose way to do it. Additionally, matching contributions, if you're going to match what your employees are putting in and anyway they become more predictable as the plan starts. So, you know, it also there's some there's some filings, some testing, some sort of requirements. The government has. So it becomes just cleaner to start January. The other optimal date could be July 1st as well, sort of on that six month increment so that you you have more predictability for both the employers and the employees specifically. If you're budgeting as an employer year on year, if you started in January, you've got a full year of budget, so you know what you're doing. All right. Kind of makes sense. So start on January 1st. Optimize benefits for everyone who's involved. Lastly, could you highlight the role of professional assistance, especially for small business owners who are looking to set up retirement plans who need some help? Yeah, you do. I mean, there are some there are some parties in here that you need to talk to to engage right. One is likely an investment advisor like our firm. There's also a record keeper, you know, depending on the size of your plan. There are clear record keeping standards that the Department of Labor who administers or watches over retirement plans, you know, require. So, you know, that's why it requires some professional help to set these up. And depending on the size of your business, it's real. It could be as simple as using something called simple IRAs all the way to, you know, graduating upward to utilizing 401K's and other programs that allow people to save for for retirement. So there are options and, you know, there are not many obstacles, as many obstacles as there used to be for employers to set these up. They're really obviously important for employees to start saving for retirement, to replace income when they're not working. And additionally, for employers now to get these tax credits as well as, you know, provide their employees some benefit, that's fantastic. Really good topic here today. Jim, thanks for the insights. Now, for our business owners out there, remember that starting a retirement plan for your employees can not only benefit your team, but also offer a significant tax advantages. So don't wait. Explore your options and make the most of the opportunities available to you. If you're interested in learning more about how to set up a retirement plan for your business again, reach out to Weiss, Hale and Zahansky Strategic Wealth Advisors. 860-928-2341. Or check out their website for a complimentary consultation. It's been a pleasure, as always, Jim, to have you here today. Thanks for joining us. Thanks, Gary. That's it for today. Thanks for listening to You And Your Money. Find even more episodes, videos and other resources at our web site. whzwealth.com. Be sure to come back next week for more tips to help you live fearlessly and pursue your financial and life goals. Until then, live well. Weiss, Hale and Zahansky Strategic Wealth Advisors offer securities and advisory services through Commonwealth Financial Network member FINRA/SIPC, a registered investment advisor. Fixed insurance products and services offered through CES Insurance Agency. They practice at 697 Pomfret Street, Pomfret Center, Connecticut 06259 and can be reached at 860-928-2341. Weiss, Hale and Zahansky Strategic Wealth Advisors do not provide legal or tax advice. The tenured financial services team strive to support clients in achieving their financial life goals. For more information regarding wealth management and customize financial planning with Weiss, Hale and Zahansky Strategic Wealth Advisors, please visit. www.whzwealth.com.