The Top Retirement and Savings Account Options for Small Business Owners

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By
Devin Miller
February 2, 2022

Small businesses may have fewer benefit resources, but there are still great retirement and savings account options they can provide their employees. Here’s what you should know.

Key takeaways:

  • Small business owners should help their employees become more financially secure to boost overall satisfaction and stay competitive
  • Good savings plan options for small businesses include:
  • Retirement: defined contribution plans and nonprofit plans
  • Health Savings Accounts: contributions made pre-tax for medical expenses
  • Emergency Savings Accounts: employer-sponsored plans to help employees save for sudden costs

Businesses in all industries offer benefits packages to stay competitive. This can be more challenging for small business owners. Often, they don’t have all the financial resources to offer everything they’d like to provide workers. 

Today’s employees want more than health insurance and salaries. Retirement and other savings options are now some of the most important benefits companies can offer, and people will make the difficult decision to leave a job to find these benefits elsewhere if they’re not offered at their current company. Obtaining financial security isn’t easy, especially as people are currently struggling with the higher prices of goods due to increasing inflation.  

We will walk through why it’s so important to offer financial savings benefits as a small business owner and some of the best options you have to make that happen.

Why are savings benefits important?

Supported employees are happier, more engaged workers. Benify research shows that the employees most satisfied with their benefits have a level of engagement that is 11.5% higher than average and 25.3% higher than people who are the least satisfied. A better benefits program can definitely lead to greater employee retention and increased productivity. 

Helping your employees in their pursuit of financial security is important. Americans say they would need to save $500,000 to feel financially secure, according to one report. Even if you can’t contribute to quite that level, money stresses are extremely common, and so offering support in any way is a major benefit for employees. 

While it’s not always possible to offer the same level of benefits as big companies, small business owners can still take advantage of plans that will help people save. There are great options out there for retirement plans, Health Savings Accounts (HSAs), and Emergency Savings Accounts (ESAs). Let’s walk through them. 

Retirement plan options

There are a few good plans you can choose from for retirement savings. It’s important to point out that if you are the only employee and are self-employed, you should consider an option like the solo 401(k) or self-employed 401(k). The IRS refers to these as “one-participant 401(k)s.” 

Generally, workplaces with more than 20 employees can consider the traditional 401(k) option. These are defined contribution plans, in which both the employee and the employer contribute to an individual retirement account. These contributions are then invested on behalf of the employee, and there is not a promised amount that will be received upon retirement. 

Tax is deferred with these traditional plans. That means an employee will wait to pay taxes when they make withdrawals in retirement. Similar plans are 403(b)s for nonprofits, and the 457(b), which is an option for state and local government employees.

Individual Retirement Accounts (IRAs) are other retirement savings options. Self-employed workers or businesses with fewer than 20 employees may consider the Simplified Employee Pension  (SEP IRA). For those with fewer than 100 employees, the Savings Incentive Match Plan for Employees (SIMPLE IRA) is a great option. 

These IRAs give the tax advantages of a regular IRA but have less administrative hassle for small business owners. Employees may be able to take a tax deduction for their IRA contributions, and then income tax payments are deferred, as with the other plans. These plans offer more robust ways for employees to save for retirement at small companies. 

Health Savings Accounts

HSAs are great savings options for small business owners. They are set up with a health benefits provider, and they allow qualified employees to make pre-tax contributions to their account which is devoted to saving for medical expenses. HSAs are pretty inexpensive for employers to manage. You also get to take a tax deduction for your contributions if you choose to make those.

Employees can use HSA dollars to pay for healthcare copays and medical and dental expenses. They don’t cover health insurance premiums, however. HSAs benefit employees because they give them dedicated funds to cover healthcare costs, and, because contributions are made before tax, they will have lower federal taxable income.

Emergency Savings Accounts (ESAs)

Small business owners should also strongly consider offering an ESA. Americans often overlook emergency savings because they’re focused on saving for a specific purchase or retirement. The ESA helps them set aside money that is solely for unexpected events. These could be medical emergencies, loss of income, car problems, expensive home repairs, and more.

Offering an ESA can also help you stand out as an employer and attract top talent, which can sometimes be more challenging for small businesses with limited budgets for benefits. 77% of employees say they would participate in an employer-sponsored ESA if it was offered. With most employees stressed because of pandemic impacts (90%) and worried about not having enough emergency savings, offering an ESA is a simple way to support them in becoming financially secure. You can decide whether to match employee contributions, too, making the ESA and your benefits package more appealing.

Start an ESA with the help of SecureSave

The financial wellness of employees is an important consideration for small business owners. You may not have the resources that a large company has but there are many great, affordable options out there. Offering retirement and savings account plans helps you support workers and stand out when looking for new talent.

When you need an easy solution to round out your benefits package, SecureSave can help. We provide a simple and convenient solution for your ESA program. You can integrate our app with your preferred payroll vendor and processes can be automated. Our product was built to be solely focused on emergency savings because we understand how important they are to financial security. Our goal is to make it as easy as possible for employees to save and for employers to offer this benefit.

Visit us at www.securesave.com and contact SecureSave today to learn more about how we help employers set up an effective ESA program.

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Devin Miller

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