What Are Some Tips for Setting up a 401(k)?


Quick Answer

Business owners setting up a 401(k) should have clear goals in mind, according to the Huffington Post. It is also important to customize the 401(k) plan according to the business' needs, notes Forbes.

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Full Answer

There are three main types of 401(k) plans that can be considered: a safe harbor 401(k), a traditional 401(k) and an advanced profit sharing 401(k), explains Forbes. The safe harbor plan and traditional plan are the most popular, according to the Huffington Post. The main difference between these two plans is that safe harbor plans require mandatory employer contributions to be fully vested.

It is advisable to limit the plan to about a dozen funds covering the major investment categories, as stated by MarketWatch. Offering a balanced or target-date fund that invests in both stocks and bonds also provides a convenient option for employees who do not wish to customize their investment combinations.

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