Why Retirement Plans Are the Hidden Driver of Team Retention and Profitability
Small business owners understand that when their employees thrive, their businesses thrive. That’s why they often invest in their employees’ well-being through flexible schedules, health benefits, and a supportive culture. These benefits work in concert, leading to more stable, productive, and engaged teams.
But when part of that support is missing, the balance is thrown off. The effects are felt on both sides. Employees may experience greater stress, reduced focus, and a sense of instability. Employers, in turn, face rising absenteeism, lower morale, and higher turnover, challenges that are especially disruptive in smaller organizations.
One area of the benefits ecosystem that is still often overlooked is financial wellness, especially retirement planning. When employees don’t have access to a well-designed plan, they are often unable to retire on time, putting pressure on healthcare costs, stalling workforce advancement, and limiting an employer’s ability to bring in new talent.
While cost and complexity have historically kept many small businesses from offering retirement plans, the retirement plan industry is evolving. Today, there are more accessible, affordable solutions designed specifically for small teams, making it easier than ever for business owners to provide meaningful benefits without impacting their bottom line. This article examines the often-overlooked business impact of financial wellness, the strategic value of retirement benefits, and key considerations for small employers when evaluating their options.
The Hidden Costs of Financial Stress
Many small business owners believe they’ve taken the right steps to support their teams by offering good schedules, fair pay, and a healthy culture. But financial stress can be difficult to detect. It doesn’t always show up as a direct complaint or request. More often, it shows up as fatigue, distraction, and disengagement. Employees under financial pressure are five times more likely to be distracted at work.
They are also more likely to experience the following symptoms:
- Difficulty sleeping and chronic fatigue
- Anxiety, depression, and low morale
- Reduced focus and poor job performance
- Physical symptoms such as illness or tension
- Strained relationships, both at work and at home
Over time, these issues take a toll on both the employee and the business.
For small businesses, the impact is hard to ignore. With limited resources to cover absenteeism and tighter margins, even small dips in performance carry weight. High stress leads to high turnover. And one of the biggest contributors to this stress is uncertainty about long-term financial security, particularly retirement, as more than half of Americans are concerned about their ability to achieve financial wellness in retirement.
Retirement Benefits as a Strategic Advantage
With the advancements of retirement benefits, employee and business financial security and growth are no longer a matter of if but when. The return on investment is clear as plans not only serve as an effective tool for reducing employee stress and strengthening retention, but also for supporting long-term business growth and scalability simultaneously.
Offering a plan like a Solo 401(k) or a Safe Harbor helps small businesses stand out in a tight labor market, signaling that you’re committed to your team and thinking beyond the next quarter. And despite outdated perceptions, retirement plans don’t have to be expensive or complex, as many offer customizable plan designs and tools that drive greater value to both employees and employers. Like a well-nurtured garden, the more care you provide your team, the more your business’s profitability will grow and thrive.
Building a Financially Healthy Workplace Through Retirement Plans
Once a small business owner decides to offer a retirement benefit, the next question is: Where do I start?
Fortunately, there are more accessible options than ever before. Whether you’re a solo entrepreneur or leading a 10-person team, there’s likely a retirement plan that fits your business, including Solo 401(k)s and Safe Harbor 401(k)s, two of the most common options for small employers.
- Solo 401(k): Designed for business owners with no full-time employees other than a spouse. This plan allows contributions as both an employer and employee, with a high annual limit (up to $69,000 in 2024 with catch-up contributions).
- Considerations: Solo 401(k)s aren’t available once you hire full-time employees outside your family. Once assets reach $250,000, you’ll need to file an annual Form 5500 with the IRS, something your provider should help you manage.
- Safe Harbor 401(k): A type of 401(k) often chosen by small businesses with employees. It includes required employer contributions (using a set formula) and automatically satisfies certain IRS testing rules that apply to traditional 401(k) plans.
- Considerations: These plans require annual employer contributions and ongoing compliance responsibilities. That can sound complex, but the right provider will streamline setup, filings, and ongoing administration.
Recent changes under the SECURE 2.0 Act have made it significantly more affordable for small businesses to get started. Eligible employers can now receive tax credits that cover up to 100% of plan startup costs (up to $5,000 per year for the first three years). Additional credits are available for matching contributions, making it easier to offer meaningful support without straining your budget.
Modern providers now offer flat-fee pricing, easy onboarding, and tools designed to reduce the administrative lift. But to get the most value from a plan, it’s important to look beyond setup and cost. Long-term success depends on whether employees use and appreciate the benefit. That means understanding what they truly want:
- Live, human guidance, not just automated answers
- Clarity around fees, investment options, and how the plan works
- Flexibility, including access to emergency withdrawals or loans in hardship situations
Choose a provider that understands the needs of both employers and employees and that meets the financial goals of your team without overcomplicating your day-to-day operations.
A Strategy for People and Profits
For many small business owners, retirement planning hasn’t always felt urgent. It might have seemed too costly, too complicated, or something to handle later. But now the picture looks different.
Whether prompted by an employee conversation or a shift in team morale, there’s a growing realization: supporting financial wellness and security, especially through a retirement plan, is part of building a healthy, resilient workplace. Small business owners shouldn’t view benefits as a choice between people and profits. Long-term success depends on both.
Tim Cowart is the Chief Financial Officer at Ubiquity Retirement + Savings, a leader in small business retirement solutions. Drawing on decades of finance experience, Tim helps business owners understand how thoughtful plan design can drive profitability, reduce turnover, and strengthen employee well-being. To learn more, visit myubiquity.com.
Photo courtesy Hanna Pad via pexels
