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How to Make Every Day a 401(k) Day

Retirement Savings Tips for Small Business Employers and Employees from ShareBuilder 401k

Bellevue, WA — Each year, American workers are honored for their achievements with a day off on Labor Day. But it’s no coincidence that directly following Labor Day, there’s a day that celebrates the journey of what Americans hope to achieve before they leave the workforce: reaching their retirement savings goals and lowering tax bills along the way! Today is 401(k) Day, and this annual event highlights the importance of retirement savings and employer-sponsored profit sharing and 401(k) plans.

While most large companies and corporations provide 401(k) plans to their employees, only about 14 percent of small businesses1 with less than 25 employees offer this important financial benefit. Small businesses employ over 33 million Americans, drive innovation, and often provide a level of customer service that bigger companies can’t match, but many face the major obstacle of finding time to think about saving. The very concept of 401(k)s often seems complicated and unaffordable to small businesses and employees, but in reality, plugging into 401(k) benefits today is simpler than ever before. September 30th is the deadline for setting up a special kind of 401(k) plan called a Safe Harbor 401(k). A Safe Harbor 401(k) plan allows businesses to maximize tax-free contributions while creating an attractive savings plan for employees.

Here are some smart retirement savings tips for both small business employers and employees on how to get started and make every day a 401(k) day from Sharebuilder 401(k), a subsidiary of ING DIRECT.

Top Five 401(k) Tips for Small Business Owners

  1. Start a 401(k) plan for your company and protect more of your money from taxes. Owners and employees can protect up to $46K a year ($51K if over 50) from taxes this year. This is a powerful tax shelter for many business owners, including sole proprietors.
  2. Leverage first time enrollment tax credits. If this is your first plan, you can qualify for $500 tax credit for the first three years of your plan. That’s $1,500 savings and with low cost online 401(k) plans now in the market, they practically pay for themselves. Consult your tax advisor for details.
  3. Lower your costs of employee retention. Voluntary employee turnover runs at over 23% a year2. It costs 29% to 46% of a person’s annual salary to replace an employee3. That’s over $15,000 to replace an employee earning $50,000 a year. Good benefits can help. Just saving one employee can cover the costs of a plan for less than 10 employees for 13 years.4
  4. Choose low-expense funds like ETFs and index-based mutual funds. By keeping participant fees low, it gives your money a better chance to work harder for you over time.
  5. Provide a match to encourage participation in your plan and strengthen employee loyalty. If you can’t afford a match, profit sharing into your plan is another great option!

Top Five 401(k) Tips for Employees

  1. Participate in your plan — the younger you start the better! Your money can compound and grow with great result over the long-term. But don’t forget, if you are a little behind and over 50, you can contribute up to $20,500 a year, that’s $5,000 more than the $15,500 limit for younger workers.
  2. Contribute at least enough to get full company match. Many experts recommend that you contribute 10-15% of your salary, as Americans are living longer and health care costs continue to rise.
  3. Make sure your asset allocation (how much you have in stocks, bonds, and cash) is in line with your goals and comfort level with market swings. If you are uncertain of which funds to select, consider a model portfolio or target date fund that best fits your situation or risk tolerance.
  4. Re-balance your assets at least annually or even quarterly. Many plans have an auto-rebalance selection you can make. Studies continue to show that sticking to your asset allocation is the most important thing you can do besides contribute to stay on track to meet your goals.
  5. Consider putting some of your contributions in a Roth 401(k). This can hedge you against tax consequences when you reach retirement age. Unlike a Roth IRA, there are no income limitations to participate in a Roth 401(k). While you do pay taxes now on the money you contribute with the Roth, contributions and all earnings are not taxed again when you withdraw funds after reaching 59 and a half years of age.

1 2007 Small Business Annual Retirement Trends survey conducted by Harris InterActive for ShareBuilder 401k

2 US Department of Labor, Bureau of Labor Statistics, 2006

3 Retaining Talent: A Benchmark Study; DDI; Paul R. Bernthal, Ph.D & Richard S. Wellins Ph.D.

4 Calculation is based on the $15,000 cost to replace the employee divided by the annual administration price of a ShareBuilder 401k PLAN4TEN

About ING DIRECT and ShareBuilder 401k

ING DIRECT, the nation’s largest direct bank and third-largest thrift, is dedicated to inspiring Americans to become a nation of savers. Since its inception in 2000, more than 7.1 million Americans have entrusted their savings with ING DIRECT, building the bank to $79 billion in assets. For more information on ING DIRECT, or to learn more about the bank’s high-value products, including the Orange Savings Account and the Orange Mortgage, visit or call 1-800-ING DIRECT.

ShareBuilder 401k provides easy, affordable and smart 401(k) retirement plans for small businesses, ranging from the self-employed to those with 25 or even more employees. ShareBuilder 401k is a leader in providing 100 percent index-based ETF investments in 401(k) plans. ShareBuilder 401k offers a suite of on-demand services that make it simple for employers and employees to open and manage their retirement plans online at ShareBuilder 401k plans provide market-efficient investments and model portfolios that make it easy for employees to select the smart investments to help them get on track to meet their retirement goals. Customers can also take advantage of ShareBuilder 401k Consultants, Customer Success Managers, and Customer Care Agents to receive assistance in choosing and managing their retirement benefits.

Media Contact
Louise Thach

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