Tax deferral or tax savings – do you know the differences between them? Where does the small business 401(k) fit in, and do you really benefit from this retirement strategy? Let’s discuss what makes sense for your goals. Contact us!
“The allure of starting a small business employer retirement plan can seem self-evident. Not only can business owners provide employees with a tax-deferred means to save, but a 401(k) plan with profit-sharing also gives business owners a way to save more for their own retirements on a tax-preferenced basis — reducing their tax exposure in the process. In fact, it’s not uncommon to see founders saving more in taxes than it costs them in employee contributions.
As compelling as that might seem, it’s important to note that setting up a plan is merely a strategy for tax deferral, not tax savings. And the cash outlays made on behalf of employees are of course a permanent expense that owners can never recapture.”