As a small business owner, figuring out retirement plans can be a headache once you move beyond just yourself and add a couple of employees. Options like SEP IRAs and Solo 401Ks become problematic when you have to contribute equally for all staff. But setting up a full 401K seems too expensive for only a few employees.
The good news is there are affordable 401K providers tailored to small companies with just a few people on payroll. While they may not offer all the bells and whistles of big HR providers, you can likely find administrators that cost only around $1,200-1,500 per year.
To further reduce costs, consider limiting or eliminating the employer matching contribution, at least initially. This allows employees to contribute pre-tax dollars and start saving while you avoid high matching expenses.
You can also supplement the 401K with a Backdoor Roth IRA for yourself. While contributions aren’t deductible upfront, funds grow tax-free and can be withdrawn tax-free in retirement. The Roth helps business owners maximize tax-advantaged savings.
Creative planning allows small companies to offer solid retirement benefits without the high costs. Mixing options like affordable 401Ks and Backdoor Roth IRAs can meet both owner and employee needs.
