$4,125 in taxes by contributing the maximum. Subtract the cost of the plan [a 401(k)
plan ought to be no more than $1,200 for a
company with two to 10 employees] from the
tax advantages you’ll realize and you’re looking at a savings of $2,925 while, at the same
time, putting $16,500 away for retirement.”
How a 401(k) can help your business this year
Solo 401(k) plans are for those companies
that have no employees, just owners and
spouses. You can find 401(k) plans with
administrative costs as little as $15 a month
($180 a year). Using a solo 401(k), a small business can shelter up to $49,000 ($54,500 for
those 50 or older) from taxes.
“In addition to your $16,500 personal
contribution, if you are a sole proprietor
[also some LLCs] or a partnership, you can
contribute up to 20 percent of your net
Schedule C into a solo 401(k) plan up to the
limits for 2009,” says Robertson. “It’s 25 percent of wages if your company is a corporation. That’s a great shelter that might even
drop you a tax bracket.”
By T. Foster Jones
IN A TIME when small-business owners are
looking for every opportunity to reduce
expenses and find new ways to save, starting
a 401(k) program may be the best money-saving decision they can make. And, in many
ways, smaller businesses—even those that
have just one owner and no employees—
have it better, in regard to plan costs, tax savings and benefits. Plus, with the markets still
well off the highs from more than a year ago,
it’s a much more attractive time to invest.
Owners who start a 401(k) plan now are
at a distinct advantage over those who started
during the market highs of 2007, according to
Robertson. When the markets are down, your
money buys a greater quantity of shares. When
the markets are up, your money purchases
fewer shares. Maintaining a continuous investment throughout the ups and downs is called
dollar-cost averaging. Because you get more
shares when markets are down, you could
potentially be better off down the road.
“Many forget that a good 401(k) plan
has options beyond stock funds,” says Jim.
“Fund options like Treasuries Inflation
Protected Securities, U.S. Treasuries bond
funds and money markets can provide a
safer haven for those looking to avoid the
market roller coaster.”
As you look for new ways to build reserves
and keep taxes in check, consider a 401(k). In
the short term, it can put your business in a
stronger position to reduce annual taxes; in
the long term, it can build the income and
reserves you’ll need. C
of ShareBuilder Advisors LLC, which operates
If you open a 401(k) plan, and it’s the first
for your company, you can qualify for a $500
tax credit for each of the first three years of
your plan. That’s $1,500 over the first three
years to offset setup and administration
charges for the maintenance of your plan.
To qualify for a tax credit, your business
must have at least one employee, besides you as
the owner, who earns less than $110,000 a year.
The tax credit is equal to 50 percent of administration and setup charges for your 401(k),
with a cap of $500. That’s it.
“Small businesses that match their
employees’ contributions can also deduct that
amount as a business expense—another way
that government provides incentives to businesses to offer a 401(k) plan to their employees,” says Stuart Robertson, general manager
In 2009, a small-business owner can contribute up to $16,500 tax-deferred into a 401(k)
plan; the amount jumps to $22,500 if the
owner is 50 or older.
“Let’s say you run a business with eight
employees, are under 50 years of age and are
able to contribute $16,500 into your 401(k),”
says Jim Goforth, insurance and investing services manager of Costco Services. “If you’re in
the 25 percent tax bracket, you will have saved
have had few
saving for retirement. Share-
Builder 401k and Costco have changed that.
ShareBuilder 401k has designed a
401(k) specifically for Costco small-business members, allowing them to reap the
benefits that only large companies could
“Designed for companies of one to 100,
Costco members save BIG Costco members save BIG
the ShareBuilder 401k plans are simple and
UNTIL RECENTLY, small businesses have had few options when saving for retire- ment. Share- Builder 401k and Costco have changed that. ShareBuilder 401k has designed a 401(k) specifically for Costco small-busi- ness members, allowing them to reap the
straightforward, flexible and inclusive,”
says Jim Goforth, insurance and investing
services manager of Costco Services.
It takes just three minutes to complete
an online needs assessment. Based on that
information, ShareBuilder 401k selects one
of three plans that best suits your business’s needs.
“401(k) plans can sometimes be confusing,” says Jim, “but ShareBuilder 401k
makes them easy to set up and manage.”
For more information, go to Costco.
com, and type“401(k)” in the search box or
call 1-800-239-2152. C