Small Business Retirement: What is a Traditional 401(k) Plan?

A 401(k) plan is one of the best retirement options for small business owners. This type of plan lets you save money on a pre-tax basis, which can help you grow your savings more quickly. In addition, a 401(k) plan allows you to contribute more money each year than an IRA. If you're looking for a solid retirement option for your small business, a traditional 401(k) plan may be the right choice for you.

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What is a 401(k) Plan, and What are the Benefits for Small Business Owners?

A 401(k) plan is a small business retirement plan that allows employees to contribute a portion of their paycheck to a tax-deferred account. The employer may also choose to make matching profit-sharing contributions on behalf of the employees.

401(k) plans have a number of benefits for small business owners, including the ability to attract and retain quality employees and reduce turnover costs. In addition, 401(k) plans can provide a small business owner with a source of retirement income and may be eligible for special tax breaks. 

Related Reading: Guide to Small Business Retirement Plans

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How Much Can You Contribute To A 401(k) Plan Each Year, And How Does That Impact Your Taxes?

For small business owners, 401(k) plans offer a great way to save for retirement while also getting a tax break. The contribution limit for 401(k) plans is $19,500 per year (or $26,000 if you're 50 or older). This means that you can put away a significant amount of money each year, and any contributions that you make will be deducted from your taxable income.

This can result in substantial savings come tax time. In addition, the money in your 401(k) account will grow tax-deferred, which means that you won't have to pay taxes on any investment gains until you withdraw the money in retirement. For small business owners, a 401(k) plan can be an extremely powerful tool for building a secure retirement nest egg.

Are There Any Other Types Of Retirement Plans That Might Be A Better Fit For Small Business Owners?

Yes, there are a number of retirement plan options available that can be tailored to fit the needs of small businesses. For example, a Solo 401(k) is a retirement savings plan designed specifically for small business owners with no employees and self-employed individuals. Unlike a traditional 401(k) plan, which must be sponsored by an employer, a Solo 401(k) can be set up by anyone with their own small business.

Ultimately, there is no one-size-fits-all solution when it comes to small business retirement planning. However, companies like Penelope are helping small business owners can find a retirement plan that best meets their needs. 

How Do You Choose A 401(k) Provider, And What Should You Look For In One?

When it comes to small business retirement plans, there are a lot of options out there. It can be overwhelming to figure out which is right for you and your employees. But don't worry, we're here to help. Here are a few things to look for when choosing a 401(k) provider:

  • Does the provider offer a wide range of investment options?

This is important because you want your employees to have choices when it comes to how they invest their money.

  • Is the provider easy to work with?

You want a responsive and helpful provider, not one that makes the process more complicated than it needs to be.

  • What are the fees?

Make sure you understand what fees you'll be charged, and compare them to other providers. You want to make sure you're getting the best value for your money.

Choosing a 401(k) provider doesn't have to be difficult. With a little research, you can find the right provider for your small business retirement plan. Or you can save yourself some time by getting started with Penelope. They offer subscription-based plans for just $8 per active employee per month!

What Are The Fees Associated With 401(k) Plans?

A few fees are associated with 401(k) plans, but they can be kept relatively low if you plan ahead. First, there's the cost of setting up the plan, which can be a few hundred dollars upfront but is often worth it for the long-term benefits.

Second, there are ongoing costs for things like recordkeeping and customer service. These fees can vary depending on the provider, but they're usually a small percentage of the total assets in the plan.

Finally, there may be fees for special features like investment management or financial planning services. However, these features are generally optional, and you can keep your overall costs down by sticking to the basics.

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Can You Roll Over a 401(k) Account?

If you're leaving your job, you can roll over the balance of your 401(k) into an IRA. Or, if you're switching providers, you can roll over your 401(k) into a new 401(k) with your new employer. You can also do a direct transfer from one provider to another.

The best way to roll over your 401(k) depends on your circumstances. But regardless of how you do it, rolling over your 401(k) is a great way to keep your retirement savings intact and growing.

Let Penelope Help You Set Up Your 401(k)

Now that you understand the basics of 401(k) plans, it’s time to set one up for yourself. Penelope can help make the process easy. They offer various retirement plan options suited for small business owners, and their team is there to help you every step of the way. Get started with Penelope today!

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