How can you add value to your business? Add retirement plans to invest in employees
Despite significant market and political uncertainty over the past year, the economy remains incredibly strong, delivering near-full employment around the country. According to some economists, the unemployment rate is around 5%, which is well above the regional unemployment rate of 3.4% for the Kansas City area earlier this year.
While we know more about what our future may bring than we did a few months ago, many questions remain. However, we know for sure that the demand for skilled employees remains high. This means small- and medium-sized business owners need to offer more than good wages and flexible hours to remain competitive: They need to offer their employees the ability to save for the future.
Business owners should consider creating a retirement plan and providing meaningful employee education about it. While this may sound expensive, not offering this kind of benefit could cost more in the long term. With the right advisor and approach, it can be the difference between running an efficient business with team members invested in your success and constantly searching for your next employee.
The plan and the team
Choosing the right retirement plan for a business is not simple. It’s not just another investment in a company. It’s one that can make a difference to the long-term stability of your employees, so consider the type of plan carefully.
Perhaps the most well-known plans are single-employer plans, such as 401(k)s. These types of plans provide opportunities for flexibility and personalization. However, they may not be perfect for your situation. Multi-employer plans allow similar organizations, say independent restaurants, to offer a retirement plan. Pooled-employer plans allow multiple unrelated employers to offer a consolidated retirement plan.
Regardless of the kind of plan you pick, working with a plan sponsor can help you balance the employees’ needs with the long-term growth objectives of the business. From costs to ease of use, having a team to help the ownership of the program is vital to its success.
The employee education
Providing access to a retirement plan is a critical first step. However, providing high-quality educational opportunities for employees to maximize their retirement planning potential is likely equally important.
According to a recent survey, 59% of people who are not enrolled in a company 401(k) plan believe they are currently contributing to their retirement plan. Of this group, 33% believe this to be their top source of retirement income. Addressing this confusion may be as valuable to employees as the plans.
Setting up employees for long-term success and financial security is good for business and society. It yields more customers over the long term for a business and a more secure retirement for its former employees.
A small business represents so much more than its commercial impact. These companies are vital to our community, providing jobs to our neighbors and personalized service that we’ve come to rely upon. Additionally, these companies are likely the business owner’s largest asset. Uncertainty and change are inevitable. However, making a meaningful investment in an employee retirement plan can remove several variables that get in the way of growth and will allow these businesses to continue delivering meaningful value to their owners, employees and the communities they serve.
Gregory A. Koehler, CFP, QPFC is a member of the Financial Planning Association of Greater Kansas City and co-leads the Wealth Management division for SageView Advisory Group – Midwest Region.
This story was originally published January 15, 2024 at 4:00 AM.