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Think your business can't afford a 401(k)? Think again!

clock April 20, 2017 11:30 AM by author Captain401

This article is from our friends at Captain401.

If you’re a small business owner, you probably think providing a 401(k) isn’t a possibility, given your budget. A 2014 Government Accountability Office report found that just 14% of businesses with under 100 workers offered an employer-sponsored retirement plan, even though 68% of businesses that didn’t offer a 401(k) said that it would help attract and retain talent. Employees agree: a 2016 study found that nearly half of employees surveyed rated defined-contribution retirement plans like 401(k)’s “very important” to job satisfaction.

Offering a 401(k) helps your employees, your business, and yourself – and it’s more affordable than ever. We’ll break down six myths about providing 401(k)’s, and make the case for offering this much-valued benefit.

Think your business can't afford a 401(k)?

Myth 1: Small businesses can’t afford 401(k)’s

You may think that 401(k)’s are only financially viable for big businesses. Not so long ago, that might have been true – small businesses were paying disproportionately more for a 401(k). A 2012 GAO study found that companies with under 50 employees paid nearly twice as much for record-keeping and administrative services (0.43% of assets) than did companies with over 500 employees (0.22%). However, recent developments in technology and outsourcing have made 401(k)’s affordable for businesses of all sizes.

Plus, 401(k)’s offer much better tax advantages than simple salary increases or bonuses. You can get tax deductions or credits for setting up the 401(k) plan, maintaining it, and matching employees’ contributions. From the employer and employee perspective, a 401(k) offers better tax treatment than a salary bump or bonus of the same amount.

Myth 2: There’s too much red tape

Again, even as of a few years ago, the amount of paperwork required to offer a 401(k) might well have been more than a small business could handle. The bookkeeping, accounting, and record-keeping work was daunting, especially for companies without a formal human resources department.

In recent years, though, technology has changed the retirement benefits landscape. For example, enrolling in and managing your 401(k) plan can now be done entirely online, and outsourcing HR benefits administration to a third party drastically reduces the burden on small business owners, who are already wearing plenty of hats as it is.

The manual processes of withdrawing contributions from employees’ paychecks, changing contribution amounts, and fielding employee questions can be taken entirely off of your plate – and many 401(k) providers sync with payroll providers to further reduce friction.

Myth 3: My employees won’t participate anyway

If your employees know the benefits of saving for retirement in general, and the tax advantages of contributing to a 401(k) in particular, they’ll likely show a high participation rate. When a 401(k) is available and easy to sign up for (i.e. no faxing of paperwork required), employees tend to be on board. According to the Department of Labor, around 70% of employees overall participate in their companies’ 401(k) plan; automatic enrollment could up that number to 85%.

If your plan provider educates your employees about the new plan and offers low-friction signup, you’re likely to see great participation rates.

Myth 4: Finding good investments is too time-consuming

The 2013 GAO study found that small business owners thought selecting investment options was too challenging, especially if they employed both older and younger workers. Fear of choosing the wrong investments, or even facing legal challenges, deters many business owners.

However, you can choose a 401(k) provider with a wide selection of investment opportunities that range from aggressive (for younger employees) to conservative (for older ones). Low-cost mutual funds allow you to invest based on industry, location, company size, and risk tolerance while minimizing fees. A good 401(k) provider will provide cost-effective options that appeal to all of your employees – without causing you and your employees unnecessary stress.

Myth 5: I should invest in my business instead

You’ve bet big on your company, and it’s only natural to want to maximize profits to ensure your own comfortable retirement. However, relying solely on your business to fund your retirement is a risky proposition at best: the reality is that 80% of small businesses fail within a year and a half. Even worse, a full 60% of small business owners say they haven’t saved enough for retirement. If your business offers a 401(k), you can make tax-advantaged contributions to your own safety net, setting yourself and your employees up for a financially secure retirement.

Are you considering offering a 401(k)? See how much 401(k)’s actually cost employers and check out Captain401’s low-cost retirement plans.

Behind the Scenes - March 2017

clock April 10, 2017 1:36 PM by author StephanieE
  • Stephanie Elsen (Marketing Manager) was featured in the Red Wing Republican Eagle, the local newspaper, in a “Faces A to Z” story . Stephanie is active as a board member with the Red Wing Port Authority, helps plan local events, and teaches tech classes at Red Wing Ignite, in addition to her job at Red Wing Software. She answered some questions for locals to get to know more about her. Read the story here.
  • Connie’s (Technical Writer) daughter, Jenna, danced in the Minnesota State Dance Competition and her team took 5th place. Jenna also received the Jazz All-Conference honor and was selected to dance on the Minnesota All-State Jazz Team.
  • Julie (Sales Engineer), her son Joey, and his girlfriend, Somer, participated in the Hustle up the Hancock event in Chicago. They climbed 94 floors in support of those with respiratory disease. It was the first time for all three of them. Joey did it in 15 minutes, Somer in 20 and Julie pulled up the rear with a 30 minute climb.
  • Mike (Quality Assurance Manager/Project Manager) and family visited Arizona for spring break. While there they saw the Grand Canyon and Sedona, a Nascar race and a MLB spring training baseball game.

Behind the Scenes - February 2017

clock March 10, 2017 8:53 AM by author StephanieE
  • Carole (Staff Accountant) went with three girlfriends to the NFR (National Finals Rodeo) in Las Vegas. While there they met Martha Josey - a national champion barrel racer that has been competing since 1964!
  • Katrina (Administrative Assistant) and her daughter are very happy the Pats won the Super Bowl!
  • Mike (Quality Assurance Manager) and his daughter participated in the Father/Daughter school dance team yearly recital.
  • Jada’s (Technical Support Specialist) daughter’s 5th grade basketball team went to the state tournament. They finished 12th in their division!

Red Wing Software - Notes from the President Ken Hilton

clock February 28, 2017 11:30 AM by author khilton
Ken Hilton - President Red Wing Software

When is it a good time to hire an outside professional? More often than you might think. You are probably really good at what you do in your career (or you should be doing something else). Even though you are an expert in your field, there are several things that go on in any business that are outside your area of expertise.

Since you’re reading this newsletter from Red Wing Software, I think it’s safe to assume you have some role that includes dealing with financial information. You might enter checks, record deposits, calculate payroll, or take a big picture view of the business using reports to analyze where the business should go. And, in some cases, you may be responsible for all of these things.

Even if you have a firm grasp on all financial functions in your company, it never hurts to get someone from outside the organization to review the information and give an opinion, or even audit how things are being done. I’ve mentioned in several columns that I believe if we think everything we do is being done the right or only way, we probably won’t make needed changes and grow the business or our own knowledge.

I’ll share an example of how Red Wing Software employs outside professionals. Although we have been producing accounting and other financial management software for 38 years and have many people with vast knowledge of accounting processes, employ our own in-house accountant, and have Certified Public Accountants on staff, every year we have an outside accounting firm perform an audit of our records and give their opinion, and have them prepare our corporate tax returns.

It never hurts to have an outside professional come in to your business and help it grow.

- Ken Hilton, President

Customers in the News

clock February 17, 2017 12:50 PM by author StephanieE

Hillside Farm, featured in Progressive Dairyman

Laura Flory of Hillside Farm, a Red Wing Software customer, writes for Progressive Dairyman. She recently shared a touching story of her daughter’s first smile, while on a walk to see the cows. See the story here: A time for everything: A dairywoman’s transition from farmer to farm mom.

SunBurst Dairy, featured in the Dairy Star

SunBurst Dairy, a Red Wing Software customer, was featured in the story: Variety of factors help SunBurst Dairy achieve 36 percent preg rate, in the December 24th issue of Dairy Star. In the story, Yogi Brown details how they achieve their success. Click Here to read the whole story.


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