Every fall, business owners start asking: “Should we move forward with a retirement plan now, or wait until next year?” At the same time, advisors are fielding those questions and trying to keep clients from missing opportunities.
Here’s why timing matters
A 401(k) plan isn’t just paperwork. It’s a chance for owners to reduce taxes, maximize personal savings, and provide employees with a meaningful benefit. The longer you wait, the greater the possibility of missing out.
If the goal is to allow employee deferrals in 2025, the plan must be signed and effective by October 1. Miss that date, and owners lose the chance to make elective deferrals for the year.
The good news: other incentives like startup tax credits under SECURE 2.0 and deductions for employer contributions are still available even if a plan is adopted later. But waiting means leaving a year of personal deferrals on the table.
What it takes
To be ready by October 1, a few steps need to happen in sequence:
Census data submitted – so plan design can be modeled.
Plan design decisions made – choosing features like eligibility, match formulas, and contribution flexibility.
Plan documents drafted and signed – the final step to go live.
The takeaway
If you’re a business owner, September is your opportunity to capture 2025 deferrals. If you’re an advisor, this is the moment to guide clients through the decision and show the value of acting now.
Either way, the year is coming to a close quickly and the benefits of moving forward this year can last for decades.