5 Advantages of 401(k) Retirement Plans For Doctors
401(k) plans are one of the hottest buzzwords when it comes to business owners. Whether it’s retirement planning for a doctor’s business or for a physician’s practice, no one can deny the benefits of this spicy game changer.
There’s a reason this ever-popular retirement plan has been stirring up the scene for countless years — in fact, there’s several!
Tax deductions for doctors practices:
This is perhaps the best-known benefit of 401(k) plans: tax deductions for both employers as well as employees.
Here’s how it works. In 401(k) defined contribution plans, every dollar a company contributes to their employees’ plans is a dollar that’s tax-deductible for the employer. This means a lower tax liability due to a lower corporate tax bill.
Quick and simple, just like that! And it’s entirely legal too.
401(k) plans are a magnet for medical professionals.
In the old days, employees were promised a certain amount of income through pension plans. Nowadays, employees are realizing the benefits of joining a company that offers a 401(k) and it can often sway their decision between two equally appealing job offers.
Think about it. As an employee, you’re not only looking for a good workplace environment, but you’re also looking out for your long term career goals as well as your future nest egg. So of course, you’d always go with the better option.
Attracting new talent is practically a highly intensive competitive sport in this day and age — any little edge over your competitors matter!
- Get paid to save money on your taxes:
I know what you’re thinking: this sounds too good to be true. But it’s not, and here’s how it works. There’s a special credit geared at helping small businesses, and it’s literally called that too! In “official terms,” it’s known as “Credit for Small Employer Pension Plan Startup Costs.” But let’s break that down even more.
Basically, when you set up a 401(k) plan, your business can be eligible for a $500 tax credit for the first three years of your 401(k) plan. That means you’re getting a $1,500 tax credit for starting up a 401(k) plan, on top of the advantages you’re already receiving!
And if that isn’t enough, then a little birdy by the name of “tax-deductible employer contributions” might convince you. That’s right, as an added bonus, you can save on your personal taxes by investing in your own retirement savings!
401(k) plans increase employee retention for medical practices.
In a study conducted by Plan Adviser magazine, nearly 40 percent of small-business employees say they would leave their current job for one that provides a 401(k). Countless studies back that up too, including a recent AARP survey that cites retirement plans as one of the top 10 reasons employees choose their employers.
Think about it this way: Not only does offering this attractive benefit help you stand out from competitors who don’t, this will go a long way in building a loyalty staff and retaining employees. Who doesn’t want to be well liked by all their employees?
And in the long run, it costs you more money to lose an employee than it does to match 401(k) contributions. The higher the employee turnover rate, the more a company is losing to its bottom line. And you’re not just losing money from recruiting, interviewing, and training employees — you’re also losing valuable time and energy that you and your team could be investing back into your business.
Preparing your medical practice retirement plan.
In the wise words of the Boy Scouts of America, “Be prepared.” Your employees aren’t the only ones who should be planning for their future – you should too! The reality of the situation is that not enough business owners are adequately planned for their later years.
According to a Business Owner Succession Planning Survey conducted by FBA/CNBC, 78 percent of small business owners plan to sell their business to fund 60 to 100 percent of their retirement!
That means 78 out of 100 small business owners are not at all prepared for retirement! And although this may be an option, it’s not feasible or available for every small business owner — especially when it’s time to retire. And that same report also found that less than 30 percent of small business owners actually even had a succession plan.
Small business owners don’t have superpowers. You’re as human as I am. That means that you won’t always be able to work. Circumstances outside of your control such as personal illness can be a huge set back if you’re not armed in hand with a bulletproof nest egg.
Do you really want to place a gamble on your later years, after having worked so hard to build a successful business from the ground?
Why gamble on all that hard work, when you can prepare a nest egg for that rainy day your mother’s always warned you about?
The bottom line is simple. Establishing a retirement plan for a doctor’s practice is undoubtedly a win-win for both yourself as an employer, and your employees. If you’re thinking about offering a 401(k) plan, consider the numerous advantages and opportunities it will open up. From giving you an edge on attracting fresh talent and retaining skilled employees, all the way to reduced tax liabilities and a tax credit incentive – you’re not just helping your employees save for retirement.
You’re preparing for your own future, and most of all, you’re investing in your business.
Take some time and think on it. If you’re still shopping around for the best “deal,” check out how you can supercharge your retirement savings while hacking 6 figure tax deductions using a cash balance plan. Or take a look at how doctors all around the U.S. are taking advantage of 6 figure high contribution retirement plans to prepare for their later years.