I live in the San Francisco Bay area and that means I’m immersed in startup culture. When startup founders learn that I work for 401GO, they often comment that they look forward to the day they can offer a 401(k) plan. And that’s my cue to start preaching.
Offering Retirement Benefits is a Signal of Stability
Startups are constantly competing for the attention of three groups: customers, talent and investors. Offering a 401(k) plan sends strong signals to the latter two that a startup is stable and on a course to success. It also goes a long way toward keeping talent from jumping ship for the next shiny object to come along.
It also reduces pressure to constantly give raises. According to a Glassdoor survey, 79% of employees prefer new or additional benefits over a pay increase. Employees are more likely to stay with a company that invests in their future. The Society for Human Resource Management (SHRM) found that 82% of employees consider retirement plans an important factor in job satisfaction.
Tax Advantages
When startup founders complain that money is tight, their runway is short and they can’t afford to offer a 401(k) plan, they are always surprised to learn that recently-passed legislation provides federal tax credits that might make their plan free for three years. You can estimate your savings using our tax credit calculator.
The tax benefits extend to the employees, also. Employee contributions to their 401(k) are made pre-tax, reducing their taxable income for the year, which can lead to significant savings.
Financial Wellness
Offering a 401(k) plan shows a startup founder cares about their employees’ long-term financial wellbeing. According to a study by the Employee Benefit Research Institute, employees with access to retirement plans are significantly more likely to have substantial savings.
Financially secure employees are typically more productive and loyal while experiencing less stress day to day. Lower stress means better physical health. Additionally, a PwC survey found that employees under financial stress are twice as likely to leave their job, further reducing efficiency-killing turnover.
What’s more, 401GO customers enjoy free access to a suite of personal financial management tools that drive better personal fiscal outcomes.
Payroll providers and financial advisors serving startups should counsel them that adding a 401(k) plan to their benefits packages provides them with a secret weapon that will make them more attractive to talent and investors, and having those resources in place will result in a better product certain to catch the attention of customers. Talk to me to learn more.
