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The benefits of financial wellness – for yourself and your employees

We’ve all heard the reports – study after study shows that Americans are woefully underfunded for retirement. This does not exclude small business owners by any means. In a recent Wells Fargo/Gallup Small Business Index survey, nearly 50 percent of small business owners are concerned that they will not have enough money to retire.

One of the more traditional ways employers of all sizes are able to address this issue for themselves and their employees is through a retirement savings plan such as the 401(k). Establishing a 401(k) can benefit a small business in more ways than one.

  • Improve recruitment Job seekers today are looking for companies that offer benefit packages that that include everything from healthcare and flex scheduling to matching 401(k) plans. A recent AARP survey confirms the retirement plan is one of the top 10 reasons employees chose an employer.
  • Reduced turnover According to Plan Adviser magazine, almost 40 percent of small business employees say they would leave a job for another that provides a 401(k). Improved retention means less money spent recruiting and retraining new employees.
  • Improved productivity A 2013 Harris poll reported that 44 percent of employees worry about personal finances while at work, and 29 percent actually spend time at work dealing with personal financial problems. Lost productivity and diminished efficiency are some of the unfortunate byproducts when employees are not healthy financially.
  • Tax savings 401(k) plans can help small businesses save on taxes, from possible special tax credits during the initial years of your plan to tax deductions for matching employer contributions. And, by participating in your own plan, you save on personal taxes, too.
  • Minimal time investment Web-based small business 401(k) plans are easy to set up, administer and maintain, and employees can access their accounts online 24/7.
  • Support your own retirement A 401(k) plan makes sense if, like many small business owners, you’ve been focused on growing your business at the expense of your own retirement security.
  • Support your community When you give employees the opportunity to save for a comfortable retirement, you’re helping improve the economic health of your community.

Offering a 401(k) plan is one of the smartest moves every small business owner can make. But if you’re unsure if the features and benefits of any plan will truly improve financial wellness for your employees, here are five 401(k) plan features you will want to discuss with a plan expert:

  1. Automatic enrollment Use of automatic enrollment increased to 29 percent in 2014, up from 23 percent in 2007. The feature eliminates the decision-making and action steps necessary for employees to enroll and begin contributing. They need only opt out if they do not wish to participate. Most employers set initial contribution rates at 3 percent of employee salaries. However, consideration should be given to a higher percentage to encourage increased retirement savings.
  2. Automatic increases 401(k) plans can include automatic annual increases to employee contributions, which makes it easier for employees to increase their contributions each year or when receiving a raise. Employees can discontinue automatic increases at any time.
  1. Target risk and target date options These are ideal for employees who lack the expertise to set their own asset allocations or manage their risk tolerance through the ups and downs of the market.
  2. The Roth 401(k) option Many plans now offer a Roth 401(k) option, which enables participants to contribute after-tax dollars but enjoy tax-free withdrawals at retirement age.
  3. Employee education Most employees welcome retirement savings assistance and education from their employers, as well as contribution reminders.

Whether you have a large or a small plan, ten participants or a hundred, these options can go a long way to improving your employees’ financial wellness. If your plan advisor is not talking with you about these options, he or she should be.

Securities and advisory services offered through LPL Financial. Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. The investment products sold through LPL Financial are not insured Bank Mutual deposits and are not FDIC insured. These products are not obligations of Bank Mutual and are not endorsed, recommended or guaranteed by Bank Mutual or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible. Bank Mutual and Mutual Financial Group are not registered brokers/dealers and are not affiliated with LPL Financial.

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Steve Dryer is the President of Mutual Financial Group, the investment services, insurance, and wealth management subsidiary of Bank Mutual. Steve has nearly 30 years of experience in the Financial Services industry, focusing on investment and insurance strategies for individuals and businesses. Steve received his MBA in Finance from Marquette University.

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