There’s been a lot of talk in the news recently about excessive fees in 401(k) plans. There’s also been a fair amount of hand-wringing about 401(k)s in general -- plenty of articles seem to suggest that the system is too broken to offer any realistic chance of retirement security for the average American. Even Ted Benna, the father of the 401(k), was quoted in a marketplace.org article, saying:
“Hey, if I were starting over from scratch today with what we know, I'd blow up the existing structure and start over," he says. "What I'm talking about isn't 401(k). I'm talking about the way investing is done."
Enough with the hand-wringing and crocodile tears! A good 401(k) plan is, without exception, THE BEST vehicle for saving. Full stop.
Benna may not have created 401ks to be the primary vehicle for retirement savings, but 401ks are here for the long haul so it’s time to start extolling the virtues of a retirement plan that offers one heck of a benefit to small businesses and employees alike: the employer match.
Employees are the heartbeat of any small business. Attracting and compensating qualified talent is a critical component of the business’ success. Strong and appropriate employer contributions incentivize employees to save. A typical match might be 50% of the employee contribution - that’s a 50% return on investment instantly, and it’s tax deferred. It is the best deal in investing.
And the goodwill the employer earns from a match is returned many times over from employee retention and productivity. At Employee Fiduciary, we contribute up to 3.5% of our employees’ salary into the plan. It is one of the best ways we can compensate our people and I’ve never regretted the decision - even when I get the bill!
If you are currently not providing an employer match, look into it. It’s great way to improve your organization.
Let me know what you think about 401(k) matches - drop a comment in the box below and I’ll respond as soon as possible.