What is a 401(k)?

A 401(k) is an employer-sponsored retirement savings plan that helps employees and business owners alike contribute for retirement. A 401(k) can make the difference in saving a meaningful amount for retirement and help empower you and your employees to chase new dreams and better care for those you love. 401(k) plans are a popular retirement plan for businesses and employees because they offer flexibility, automatic payroll contributions, high contribution limits, and tax benefits.

How Does a 401(k) Work?

With a 401(k), money is typically contributed from your earnings into your 401(k) account with each payroll and placed into an investment of your choosing from a retirement appropriate fund roster. Individuals can select a percentage or amount to defer from their salary each payroll. This money is invested with the goal for it to grow over time and help fund each employee’s retirement.

Taxes aren’t paid on this money until it’s withdrawn in retirement. Of course, many plans now also offer a Roth 401(k) feature that allows participants to make after-tax contributions to their plans, and this money is not taxed when withdrawn in retirement. If an employer offers a match or other contributions to employee accounts, these monies are always provided on a tax-deferred basis.

Why is a 401(k) a Good Solution for My Business?

High Contribution Limits Can Help You Save More

401(k)s offer significantly higher contribution limits than most if not all other retirement solutions in the United States, allowing you to save more each year.

Tax Benefits for You and Your Business

401(k)s offer tax breaks and deductions for your business. Most company costs associated with operating a 401(k) plan can be deducted at tax time – including any contributions your company makes to the plan. Those starting a plan with employees can also qualify for tax credits. And of course, owners also receive personal tax benefits if they contribute to their 401(k) account.

Flexible Plan Designs to Meet Your Business Needs

As the plan sponsor and/or trustee, you select the rules for who is eligible to participate, whether your company will match contributions, how long before employees become vested, and more.

Portability to Manage Your Retirement Savings

You can roll your 401(k) over if you decide to start another company, retire or convert to an IRA if/when you leave the business.

Attract and Retain Top Talent

Strong benefits can help retain your team. Research indicates that 61% of employees would leave their current employer for a similar job if it offered better retirement benefits¹. Whether you're recruiting or seeking to keep your current employees, a 401(k) is a terrific incentive.

¹ Employee Retirement Study conducted by Wakefield Research for ShareBuilder 401k, August 2018

Our low-cost 401k plans are easy to setup online and are supported by our 401k advisors and specialists. ShareBuilder 401k serves small business and medium-sized companies, as well as the self-employed. We offer Roth 401k, Safe Harbor 401k, Traditional 401k, and Solo 401k options. Your 401k plan is paired with investment management expertise and employee education to help you save more.