With all the talk of raising taxes many business owners are looking for ways to reduce taxes. Establishing a 401(k) for your business has benefits for both the owner and the employees. We must think long term to reach our financial goals.

Here are four ways a 401(k) can help you and your business:

1. Tax-defer up to $49,000 from your own personal taxes this year! That’s right.  Every employee including the owner has the ability to contribute $16,500 a year tax-deferred in 2011 to his or her 401(k) account ($22,000 if you are 50+ years of age) plus receive employer match and/or profit sharing contributions up to the $49,000 limit ($55,500 if over 50).  The tax savings alone can help many business owners keep more of their own money versus not having a plan at all.
2. Build a nest egg of a $1M or more in 25 years or less. Tax savings are big enough reason alone to start a plan, but when you combine high contribution amounts with compounded growth, your 401(k) can build to be a big financial asset.  An owner who earns $140,000 a year and contributes $16,500 a year and receives a four percent match (an additional $5,587 a year) into his 401(k) account could have $1,396,977 in 25 years.  This does assume a 7% annual return on the savings which of course could be more or less depending on markets and investment selections.  Regardless, it can be a meaningful amount.
3. Save some serious money retaining and attracting top talent while helping your employees too. Great employees can switch jobs in good or bad economies.  Not too many things are worse for a business than losing a top employee with invaluable business knowledge and customer relationships.  Add in the costs of hiring, training, and ramping up a new hire and the actual costs are often two to four times greater than most expect.  401(k) plans are one area that small business can get an edge on big business and standout in the current business climate.

There is no better time to start or improve your company 401(k) plan than right now. Talented employees are becoming very difficult to find and retain. A well designed retirement plan for your employees can go along way in building your business.

Please comment or call to discuss how this would help your business grow.