By Justin Pritchard, CFP®
We’re increasingly on our own when it comes to saving for retirement — whatever your version of retirement looks like. Previous generations enjoyed defined-benefit plans (or pensions) to support them when they stopped working. Now, most people with workplace benefits have defined-contribution plans like 401(k) plans. There’s also Social Security, but that’s not getting any more generous.
If you don’t have retirement accounts available, it’s time to start your own 401(k) or similar retirement savings program. The route you take will depend on your situation. You’re either:
- An employer, self-employed individual, or benefits manager who wants to set up a 401(k) plan for your business, or
- An employee of a company that does not currently offer a retirement plan
- About to sign up for your employer’s 401(k) and you want to learn how (if so, read this instead)
If number 2 describes you (you’re an employee earning W-2 wages), you may not be able to set a plan up yourself, but you still options, which we’ll discuss below — scroll down to the green box with white text if you want. 401(k) plans are employer-sponsored retirement plans, so your employer must establish a plan unless you earn any self-employment income. If your employer won’t play along (they might just need some nudging), you need to take matters into your own hands.
How to Start a 401(k)
Setting up a 401(k) plan can be as simple or as complicated as you like. Most people outsource at least some portion of the process. In particular, they use a “template” legal document to establish the 401(k) plan, which is substantially less expensive than hiring attorneys to draft original documents. Unless your retirement plan is especially complicated or you’re trying to get fancy (and you’re willing to pay for extra features), you’ll probably use preconfigured programs from 401(k) vendors. These programs are often called “volume submitter” or prototype plans, and they’re an excellent choice for most companies and nonprofits.
Here are the crucial pieces of any 401(k) plan. While this list seems extensive, in some cases, a single company provides several of these services.
I’ve used Solo 401(k) providers for my own business, and I helped my wife with this as well. I suggest keeping things as simple as possible (while getting all of the features and services you need). That’s based on our experience, plus the dozens of larger employers I’ve worked with. When you go beyond essential plan features, it’s easier to make mistakes and waste time.
I’ve used Solo 401(k) providers for my own business, and I helped my wife with this as well. I suggest keeping things as simple as possible (while getting all of the features and services you need). That’s based on our experience, plus the dozens of larger employers I’ve worked with. When you go beyond essential plan features, it’s easier to make mistakes and waste time.The plan document is a legal document that details the rules of your 401(k) plan. It defines specific terms, and provides a roadmap for any questions that come up when administering the plan. The plan document is a long legal document that most people never see. Instead, employees receive a shorter version of the document, known as the Summary Plan Description (SPD), when they enroll in the plan. For reference, here’s a sample of a plan document.
The adoption agreement is a document you use to establish your 401(k) plan. The adoption agreement allows you to customize the plan so it fits your goals and your organization. In many cases, it’s a list with numerous checkboxes: Do you want to allow loans — yes or no? Is there a match? What kind? Which vesting schedule do you want to use? The plan document is more or less boilerplate required language for any plan, but the adoption agreement makes it your own plan.
The trust is a legal entity, and it’s what you might call the plan. Using a plan document and adoption agreement, your 401(k) service providers create the trust for you (it’s less complicated than it sounds). Every trust needs a trustee, so you must decide who will serve as trustee of your plan. In most cases, it’s the business owner, president, or somebody in a similar role. If you’re self-employed, you’ll most likely serve as the trustee of your own 401k plan. The trustee is the one legally responsible for ensuring that the plan follows all rules and laws, so it is somewhat risky to take on this role — especially if you run a large company. However, countless trustees around the nation serve without any problems.
Plan administrator: Somebody needs to administer the plan on a day-to-day basis. This person does not have the same level of responsibility as a trustee, but they need to be aware of important rules and deadlines. In many cases, the administrator and trustee are the same person. This is the Plan Administrator, and is not the same as the Third-Party Administrator.
Third-party administrators (TPAs): A TPA performs critical services for a 401(k) plan, such as filing tax returns for the plan, interpreting rules if there are questions, annual discrimination testing, monitoring maximum contribution levels, and processing loan or distribution requests. A good TPA helps employers avoid mistakes, and these organizations are available both locally and nationwide. You might use a TPA as part of a bundled service with your recordkeeper or other vendors, or you can hire a firm that only does administration. Especially when you want to customize a plan, a separate TPA can be useful.
Recordkeepers or investment providers are probably who you think of as your 401(k) vendor. These are often large financial companies that you send contributions to. They print your retirement account statements and run the website you use to trade and invest. Depending on how you set up your plan, the investment provider and recordkeeper (as well as the TPA) might be the same company. This is often the arrangement for self-employed people setting up a Solo 401(k) . Numerous providers exist with varying levels of service and fee structures, and big names aren’t always best, especially for small plans.
Financial advisors and consultants are individuals or firms that provide advice to employers (and possibly employees or “participants”). For an additional fee, they’re available to help you decide what type of plan is best, how to set up the plan, which investments might be appropriate for the menu (if applicable), and which individual investments to choose within the plan. Some investment advisers, like 3(38) fiduciaries, manage funds and make changes in participant accounts with no involvement from employees, while others provide advice and you implement the changes yourself. TPAs and recordkeepers also provide some level of consulting, and they may be able to provide insight into several areas above.
How to Set up a 401(k) Plan
Now that you know the landscape, you’re ready to set up a plan as an employer or self-employed individual. Whether you’re establishing a plan for a large enterprise or or on your own the next steps are:
- If you’re self employed, decide if you want a SoloK, SEP, or SIMPLE.
- Decide if you want to use a financial advisor (like me) or other consultants.
- Decide which plan provisions you want (loans, Roth 401(k), Safe Harbor, matching, vesting schedules?).
- Choose a vendor (evaluate flat-rate pricing, investment costs and fees, technology, and other features).
- Complete the adoption agreement along with other agreements and submit to your vendor(s).
- Communicate and educate: Inform employees (if any) of the plan’s existence and features.
- Set up individual participant accounts.
- Fund the plan through payroll or any employer contributions.
- Review the plan regularly to ensure it’s meeting the needs of plan participants.
- Monitor and adjust the plan as regulations change and your needs evolve.
- Provide required information to participants on an ongoing basis.
Start Your Own Retirement Plan (When Your Employer Doesn’t)
When you’re an employee, you can only use a 401(k) plan if your employer establishes a plan and you’re eligible to contribute. All too often, that’s not the case. But you still have options.
5 Ways to Save on Your Own
Ask for a 401(k): Your employer might be willing to set up a 401(k) — they just haven’t done it yet. Start the conversation by asking why there isn’t one, why you want one, and that there are potential tax (and other) benefits for employers. Explain that valuable employees like yourself would be even more valuable with excellent benefits. Offer to do some (or all) of the legwork required to get the plan up and running. In some cases, especially with small organizations, your employer simply doesn’t have time to set up a plan. Cost is another factor — companies and small nonprofits might be hesitant to pay plan costs (not to mention matching, profit sharing, or required contributions to employees). If cost is the primary concern, discuss less-expensive options like SIMPLE plans. Only time will tell if it’ll actually happen, but it never hurts to ask.
IRAs: If you don’t have a 401(k), you may still be able to save in an individual retirement account (IRA), and you might even receive tax benefits similar to a 401(k). Unfortunately, the IRS sets maximum annual limits much lower for IRAs. Still, something is better than nothing. Evaluate traditional IRAs for potential pre-tax saving, and Roth IRAs for possible tax-free withdrawals (assuming you follow all IRS rules). Another drawback of IRAs (compared to a 401(k)) is that you may need to qualify to make contributions or receive a deduction. Speak with a tax expert before you do anything.
Side job? Put it all away. If you have any self-employment income, you might be able to save in a Solo 401(k) (or one-person 401(k) plan). Many types of self-employment qualify, especially if you actively earn income: walking dogs, freelancing, and consulting gigs are all viable options. You might be able to save up to 100% of your net earnings (up to certain limits), which helps you make a nice dent in your retirement savings. The more you save, the more it helps you retire when you want.
Save in taxable accounts: Annual IRA limits don’t enable you to make a substantial contribution toward a comfortable retirement. If you’ve maxed out and you want to save more, you can always save in standard “taxable” accounts. These non-retirement accounts won’t offer much in the way of tax benefits, but they’re far superior to not saving. At some point, you may be able to shift funds from those accounts into retirement accounts (if your employer ever sets up a plan or you start your own 401(k) and business). You can even move funds indirectly by living off your taxable account and contributing as much income as possible to the retirement plan.
Health Savings Accounts (HSA): If you have a qualifying high-deductible health plan, you might be able to use an HSA to accumulate retirement savings. Those accounts have unique triple-tax benefits: The money goes in pre-tax, growth is tax-deferred, and distributions are tax-free when you follow all IRS rules. If you’re eligible to contribute, HSAs are an excellent tool for retirement savings because you don’t need to spend the money you contribute each year (there’s no use-it-or-lose-it feature). Instead, you can keep funds invested for long-term growth. It’s highly likely that you’ll have healthcare costs in retirement, so HSA funds should be useful, and women, in particular, can benefit from substantial amounts in these accounts.
Starting a 401(k) Without a Job
If you don’t currently have a job, you may have some challenges. 401(k) plans are employer-sponsored plans, meaning only an employer (including self-employed people) can establish one. If you don’t have your own organization (business or nonprofit) and you don’t have a job, you may want to evaluate contributing to an IRA instead. However, those accounts may require earned income during the year to contribute, so it’s not as simple as you might hope. That said, a spousal IRA may allow certain couples to contribute to a retirement account with no job.
Important: This page touches on complicated topics related to tax and employment law. The information on this page might not be accurate, up-to-date, or relevant to your situation. Do not make important decisions based on what you read here. Instead, speak with an expert who has a detailed knowledge of your situation and any applicable regulations.
Justin Pritchard, CFP® is a fee-only financial advisor. Based in Montrose, CO, Justin works with clients remotely, regardless of location (where not prohibited), providing financial planning, investment advice, and help with small business retirement plans. He has been quoted in the Wall Street Journal, Forbes, US News and World Report, and more. Learn more about Justin and let him know what’s on your mind! Please note that I handle standard 401(k) plans that invest in mutual funds, ETFs, collective investment trusts, and similar vehicles. If you want to invest in a private business or real estate with your 401(k), I cannot help you.
FAQs
Start Your Own 401k (For Yourself or Your Company)? ›
401k accounts are typically offered through your employers, so usually individuals cannot open their own 401k account. The exception is if you own a business yourself, or considered self employed.
Can you set up a 401k for yourself? ›If you're self-employed and don't employ others, you are eligible to open a solo 401(k). A couple running a business together also qualifies. You can contribute to your solo 401(k) as both employer and employee. You can choose between a traditional plan or a Roth plan.
Should I start a 401k for my business? ›It helps you recruit more qualified employees
Help your small business attract the best employees by offering a 401(k) plan with a matching employer contribution. If potential employees know that you're committed to helping them save for retirement, they'll be much more likely to accept your job offer.
Can I Get a 401(k) on My Own? Individuals cannot open a 401(k) unless their employer offers one; however, if you are self-employed or own a business, you can open other plans, such as a solo 401(k) retirement plan, a SIMPLE IRA, or a simplified employee pension (SEP).
Can an LLC set up a Solo 401k? ›The federal tax law allows employees to participate in their employer's 401k plan to take advantage of the tax deferral on contributions to the retirement account. However, if you are a self-employed member of a small business that operates as an LLC, the IRS allows you to set up a 401k plan for yourself.
How much does it cost to have your own 401k? ›401k plans cost between 1% to 2% of the plan's assets (the money saved in the account). Many factors impact the total cost of the plan, from the provider you work with to the plan you choose. For lower fees, make sure you find the best available 401k provider.
How do I set up a Solo 401k for myself? ›You can open a solo 401(k) at most online brokers, though you'll need an Employer Identification Number. The broker will provide a plan adoption agreement for you to complete, as well as an account application. Once you've done that, you can set up contributions.
How much can an LLC contribute to a 401k? ›Contribution Limits
You can contribute up to $57,000 per year, and $63,000 per year if you are age 50 or older. IRS Publication 560 has more information on overall plan contribution limits.
Yes. As mentioned earlier, 401k plans are tax-deductible for employers. Because 401k plans have several tax benefits, they are usually less expensive to offer than defined-benefit plans. The good news is that usually, every dollar a company contributes to a staff member's 401k is a write-off.
Why is a 401k better than investing? ›401(k) plans are generally better for accumulating retirement funds, thanks to their tax advantages. Stock pickers, on the other hand, enjoy much greater access to their funds, so they are likely to be preferable for meeting interim financial goals including home-buying and paying for college.
What happens to my 401k when I quit? ›
If you leave your job, your 401(k) will stay where it is until you decide what you want to do with it. You have several choices including leaving it where it is, rolling it over to another retirement account, or cashing it out.
How do I start my own retirement fund? ›- Establish a goal of how much money you may need in retirement. ...
- Save as much as you can, for as long as you can. ...
- Include Social Security as part, but not all, of your retirement plan. ...
- Adjust your retirement savings plan to make up for lost ground.
Good alternatives to a 401(k) are traditional and Roth IRAs and health savings accounts (HSAs). A non-retirement investment account can offer higher earnings, but your risk may be higher, too.
Can I contribute 100% of my salary to my 401k? ›For 2022, total 401(k) contributions from both an employee and their employer cannot exceed $61,000 or 100% of the employee's compensation, whichever is less.
Does a solo 401k need its own ein? ›An employer identification number (EIN) is required to establish an Individual 401(k) plan. You can't use your Social Security number. If you don't have an EIN, apply for one online at IRS.gov.
Does Solo 401k reduce business income? ›One of the more common questions we receive from self-employed business owners seeking to establish a Solo 401(k) plan is whether it can reduce self-employment tax. The short answer is no.
How much do I need in 401k to get $2000 a month? ›To get approximately $2,000 per month from your 401k when you retire, you'll need to have saved around $800,000. To reach this goal, you must start saving as early as possible, contribute as much as possible to your 401k each year, and consistently invest in a diversified portfolio of stocks and bonds.
What are the downsides of a Solo 401k? ›The Cons. As with your employer's 401(k) plan, any withdrawals from your self-directed 401(k) before the age of 59 ½ will suffer a 10% tax penalty. Just like the 401(k) plan established by your employer, contributions made by your employer to a self-directed 401(k) may be subject to eligibility requirements.
What percentage of Americans own a 401k? ›While the 401(k) is one of the best available retirement saving options for many people, only 60 million Americans contribute to one. That's staggering given the number of employees who have access to employer-sponsored plans: 68% of employed Americans.
Can I open a solo 401k with a side hustle? ›Your side hustle can do more than provide additional income. If you have a side hustle, you become eligible to establish the Solo 401k. A Solo 401k is a robust retirement plan and the most popular among the self-employed.
How quickly can I set up a solo 401k? ›
Your local bank should able to establish the Solo 401k checking account in a couple business days. The time to transfer funds from your existing retirement accounts will vary by institution and by account type.
How does a solo 401k make money? ›Traditional solo 401(k)s are funded with pre-tax contributions and have taxable withdrawals. Roth solo 401(k) contributions are made with after-tax dollars. Qualified withdrawals are tax-free. Solo 401(k) participants could invest up to 100% of their self-employed income until they reach the contribution limit.
How do I start a 401k for my small business? ›- Create a 401(k) plan document. Create a plan document that complies with IRS Code and outlines the details of your retirement plan. ...
- Set up a trust to hold the plan assets. ...
- Maintain records of 401(k) employee contributions and values. ...
- Provide information to plan participants.
Short answer – yes! 401(k) deferrals and contributions are allowed as a general rule, but there are exceptions. The biggest issue to consider is whether or not the member or owner is providing material services that are income-producing for the LLC.
How much money will I contribute to my LLC? ›Capital Contributions and Membership Interest
Your Capital Contribution should be equal (proportionate) to your Membership Interest. For example, if Bob and Jose each own 50% of their LLC, they will each contribute the same amount of money. For example, they can both contribute $500, $1,000, or $25,000.
Q: What does a 6% 401(k) match mean? A: This means that the employer is matching up to a total of 6% of an employee's overall compensation to his or her 401(k) account on top of what the employee is contributing. So, if an employee is earning $50,000 per year, the employer's match would not exceed $3,000.
What are three disadvantages of 401k accounts? ›- Most plans have limited flexibility as it relates to quality and quantity of investment options.
- Fees can be high especially in smaller company plans.
- There can be early withdrawal penalties equal to 10% of the amount withdrawn before age 59 1/2.
Withdrawing vs cashing out your 401(k)
Withdrawing money from your 401(k) is not the same thing as cashing out. You can do a 401(k) withdrawal while you're still employed at the company that sponsors your 401(k), but you can only cash out your 401(k) from previous employers.
- Make a Plan. First, you'll need to do some in-depth analysis of your spending, future costs and the steps you'll need to take in the next five years. ...
- Cut Costs. ...
- Pay Off or Refinance Debt. ...
- Save and Invest. ...
- Enlist an Expert. ...
- Bottom Line. ...
- Retirement Planning Tips.
A 401(k) is intended for long-term retirement savings that grow through investments in the financial markets. But 401(k) plans come with restrictions on when funds can be accessed. Savings accounts are lower risk and don't have as many limitations, but can't be invested like a 401(k).
How can I double $5000 dollars? ›
- Start a Side Hustle. Perhaps the most common method of making more money is starting a side hustle. ...
- Invest in Stocks and Bonds. ...
- Day Trade. ...
- Save More Money. ...
- Buy and Resell Items on Amazon and eBay. ...
- Build an eCommerce Business. ...
- Sell Your Stuff. ...
- Earn cashback When You Shop.
If you've been let go or laid off, or even if you're worried about it, you might be wondering what to do with your 401k after leaving your job. The good news is that your 401k money is yours, and you can take it with you when you leave your old employer.
How much will 401k grow in 20 years? ›You would build a 401(k) balance of $263,697 by the end of the 20-year time frame. Modifying some of the inputs even a little bit can demonstrate the big impact that comes with small changes. If you start with just a $5,000 balance instead of $0, the account balance grows to $283,891.
How much money should you have in your 401k when you retire? ›By age 50, you should have six times your salary in an account. By age 60, you should have eight times your salary working for you. By age 67, your total savings total goal is 10 times the amount of your current annual salary. So, for example, if you're earning $75,000 per year, you should have $750,000 saved.
How to retire in 10 years with no savings? ›- Make the Commitment. The first step in preparing to retire in 10 years is simply deciding that you want to do it. ...
- Cut Your Costs. ...
- Save 75% of Your Income. ...
- Invest Your Savings Wisely. ...
- Invest for Income.
You Still Have Room to Save for Other Financial Goals
The reason we tell folks to invest 15% for retirement is because there are still some other important financial goals you need to work toward—like saving for your kids' college funds and paying off your house early.
Most of our experts agree that one of the safest places to keep your money is in a savings account insured by the Federal Deposit Insurance Corporation (FDIC). “High-yield savings accounts are an excellent option for those looking to keep their retirement savings safe.
How to save for retirement without company doesn t offer 401k? ›An IRA is a good first choice
An IRA is an Individual Retirement Account that you open in your own name. Like a 401(k), savings grow tax-deferred, which means you don't pay income taxes on the earnings as long as the money is in the account.
Some alternatives include IRAs and qualified investment accounts. IRAs, like 401(k)s, offer tax advantages for retirement savers. If you qualify for the Roth option, consider your current and future tax situation to decide between a traditional IRA and a Roth.
What is the safest 401k investment? ›Lower-risk investment types can help maintain the value of your 401(k), but it is important to consider that lower risk usually means lower returns. Bond funds, money market funds, index funds, stable value funds, and target-date funds are lower-risk options for your 401(k).
How much should I put in my 401k per month? ›
You should aim to contribute enough from each paycheck to take advantage of any employer match. If your employer offers a 3% match, contribute at least 3% of each paycheck to your 401(k). After you reach the match, increase your contributions when you can afford to, aiming for 10-20% of your paycheck each month.
How much 401k should I have at 40? ›Fidelity says by age 40, aim to have a multiple of three times your salary saved up. That means if you're earning $75,000, your retirement account balance should be around $225,000 when you turn 40.
How much should I have in my 401k at 55? ›Experts say to have at least seven times your salary saved at age 55. That means if you make $55,000 a year, you should have at least $385,000 saved for retirement.
Can an LLC set up a solo 401k? ›Solo 401(k) plans are not limited to sole proprietorships. Businesses that are structured as limited liability corporations (LLC), as well as partnerships, may also participate in these plans if they meet all the eligibility requirements.
Can I have a personal 401k without an employer? ›Can I Get a 401(k) on My Own? Individuals cannot open a 401(k) unless their employer offers one; however, if you are self-employed or own a business, you can open other plans, such as a solo 401(k) retirement plan, a SIMPLE IRA, or a simplified employee pension (SEP).
Can you have a 401k without a company? ›A self-employed 401(k), also known as a solo 401(k), can be an option for maximizing retirement savings even if you're not making a lot of money. Who can open one? If you are self-employed or own a business or partnership with no employees you can open a self-employed 401(k).
How much can an LLC contribute to a Solo 401k? ›Contribution Limits
You can contribute up to $57,000 per year, and $63,000 per year if you are age 50 or older. IRS Publication 560 has more information on overall plan contribution limits.
Strategy for maximizing a Solo 401k
Ideally, the salary should equal the max individual contribution. Maximize your individual contributions to the Solo 401k. Assuming you don't contribute to another employer 401k, you can contribute max $22,500 for the year.
Offering a 401(k) plan can help small businesses meet increasing employee expectations and retain top talent. Companies that offer 401(k) plans are eligible for significant tax breaks and deductions. Both businesses and employees benefit from optional employer contributions to workers' 401(k) accounts.
What are the benefits of setting up a 401k for small business? ›∎ Helps money grow through investments in stocks, bonds, mutual funds, money market funds, savings accounts, and other investment vehicles. ∎ Offers significant tax advantages (including deduction of employer contributions and deferred taxation on contributions and earnings until distribution).
How does a 401k benefit a business owner? ›
- 401(k) Tax Benefits: Lower Your Taxable Income. ...
- Recruitment Benefits: Employee Retention Strategies To Recruit Talent, Retain Talent, And Get Better-qualified Employees. ...
- Personal Benefits: Increase Retirement Readiness. ...
- Long-term Planning Benefits: Help Employees Retire.
Two of the reasons most commonly cited by small business owners for not offering a retirement plan are the beliefs that their business is too small to qualify and that they can't afford a match.
How do businesses benefit from 401k? ›401(k) tax benefits
Employers can deduct contributions on the company's federal income tax return to the extent that the contributions don't exceed certain limitations. Elective deferrals and investment gains are not currently taxed and enjoy tax deferral until distribution.
| 401(k) | |
|---|---|
| Pros | Higher contribution limits. Roth 401(k) option available. Employer contribution is optional. Vesting schedule set by employer. Plan may permit loans. |
| Cons | Higher setup costs and administrative requirements. Plan fees can be high, especially for small businesses. |
| More details | What Is a 401(k)? |
If you leave your job, your 401(k) will stay where it is until you decide what you want to do with it. You have several choices including leaving it where it is, rolling it over to another retirement account, or cashing it out.
How much should small business match 401k? ›The most common Safe Harbor 401(k) matching formulas are: 100% match on the first 3% of employee contributions, plus 50% match on the next 3-5% (Basic match) 100% match on the first 4-6% of employee contributions (Enhanced match) At least 3% of employee pay, regardless of employee deferrals (Nonelective contribution)
How much can a small business owner put in 401k? ›Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit: $22,500 in 2023 ($20,500 in 2022; $19,500 in 2020 and 2021), or $30,000 in 2023 ($27,000 in 2022; $26,000 in 2020 and 2021) if age 50 or over; plus.
How do I take money out of my 401k to start a business? ›First, you must have a 401(k) or other eligible retirement plan. Second, your business must be a C-Corporation. Finally, you must use the funds from your retirement account to purchase stock in your company. Once you've met these requirements, you can roll over your retirement savings into your company's 401(k) plan.
Who is considered an owner for 401k plan? ›For purposes of 401(k) plan testing, attribution involves adding the ownership interest of certain family members to the direct ownership of an individual. For example, if a husband and wife each own 40% of a company, both spouses would be treated as owning 80% of that company (40% direct + 40% attributed).
How many employees do you need to start a 401 K? ›SIMPLE 401(k) plans
This type of 401(k) plan is available to employers with 100 or fewer employees who received at least $5,000 in compensation from the employer for the preceding calendar year.
Is it worth investing in a 401k if the company doesn t match? ›
If your employer doesn't offer any match, you may be wondering if you should still participate. The short answer in most cases is that it does still make sense to contribute to a 401(k) because it can offer significant tax advantages.
Can any business start a 401k? ›Yes, any size business can offer a 401(k) plan. Traditionally, 401(k) providers charged small and mid-sized businesses exorbitant fees or ignored them altogether—leading millions of smaller businesses out in the cold without an easy way to offer meaningful retirement benefits.
Are there any downsides to a 401k? ›You'll owe income tax on your contributions and on your gains. So if you have a bigger income when you retire than when you made contributions, you'll be in a higher tax bracket and owe more than if you hadn't deferred your taxes.