Retirement Plans vs. Paying Higher Wages: Which Wins Long-Term?

Let’s be honest — everyone in cannabis wants to throw money at problems.

You’ve probably said it yourself or heard it in a meeting this week: “Our people want more money.”

And they’re right. They do. The cost of living is brutal. Inflation’s real. Rent’s rising. So yes — higher pay matters.

But what if we told you that paying more per hour isn’t always the smartest or most sustainable way to show people you care?

Because here’s the uncomfortable truth: raises disappear as fast as they arrive. Benefits last.

And in cannabis — an industry already defined by volatility — your biggest long-term mistake might not be underpaying people. It’s under-investing in their future.

This isn’t about being cheap. It’s about being strategic.

Because real businesses don’t just build wealth off their people. They build wealth with them.

The Great Pay Myth: Why “Just Pay More” Doesn’t Work Forever

Let’s start with the easy narrative — the one every struggling operator tells themselves when turnover spikes.

“People are quitting because we’re not paying enough.”

Sometimes that’s true. But often, it’s only part of the story.

You can keep adding $1 or $2 to the hourly rate, but if you’re not changing the story of what employment means in your company, you’re just putting a Band-Aid on a bullet wound.

Wage increases solve immediate pain. Benefits solve existential pain.

Because a pay raise might help someone pay rent next month.
But a retirement plan helps them believe they’ll still be okay in twenty years.

The first fixes a bill.
The second builds a future.

And the companies who understand that difference are the ones who last.

The Turnover Equation No One Calculates

According to the 2024 Vangst Jobs Report, the average turnover rate in cannabis sits between 35 % and 45 %, depending on the role. Every time you lose an employee, you’re not just losing a worker. You’re losing institutional knowledge, morale, and thousands of dollars.

Cost of replacing one budtender: $3,500 – $5,000
Cost of replacing one cultivation tech: $5,000 – $8,000
Cost of replacing a mid-level manager: $10,000 – $15,000

Multiply that across dozens of roles and you start to see how expensive churn really is.

A well-structured 401(k), on the other hand, can cost an employer less than $1,000 per year per participant (often less). Those dollars create tangible retention benefits.

You could invest a small fraction of your turnover cost in a retirement plan and end up saving exponentially more.

This isn’t a “nice-to-have.” It’s an efficiency play.

The Psychology of Future Thinking in Cannabis Workplaces

Money gets attention. Benefits get loyalty.

Humans don’t stay somewhere because they’re paid the most. They stay where they feel the most secure.

And in cannabis — where regulatory risk, 280E headaches, and federal illegality constantly hang in the air — that security matters more than ever.

A SHRM study found that 73 % of employees said benefits were a major factor in staying with an employer, while only 55 % cited pay alone.

Because at the end of the day, we all want the same thing: to believe our effort today leads somewhere tomorrow.

If your company isn’t offering that, no hourly raise will change the underlying feeling that “this isn’t forever.”

The Real ROI of Retirement Benefits vs. Raises

1. Retention vs. Reaction — A raise reacts to pressure. A 401(k) creates gravity.

2. Cost Efficiency — A $1 hourly raise equals roughly $2,000 more per employee per year. Multiply that by 50 employees and you’ve spent $100 k annually — every year — with no compounding return. The same $100 k in a 401(k) program produces measurable loyalty and recruiting leverage.

3. Tax Advantage — Raises increase payroll taxes. 401(k) contributions often don’t. Employer contributions are deductible under ERISA and the IRS. With Paragon’s integrated payroll, legality becomes leverage.

This is why smart CFOs see 401(k)s as a compliance and strategy tool, not an expense line.

When Cannabis Companies Confuse Morale with Money

A lot of cannabis employers are trying to buy culture.

They throw pizza parties, free merch, and bonuses hoping people stay. But deep down, everyone knows culture can’t be bought.

People don’t quit over pizza. They quit over purpose.

They quit because they can’t see what’s next. Because they don’t feel part of a system that invests in them beyond the next pay cycle.

That’s where a 401(k) comes in — not as a formality, but as a message: We’re building something worth staying for.

The Domino Effect of Doing It Right

When a cannabis company decides to offer a legitimate retirement plan, everything changes.

Internally, people start talking differently. They use words like “our company,” not “this job.”

Externally, banks see maturity, boards see governance, regulators see reliability, and investors see longevity.

That’s the difference between a company and a brand. One just pays people. The other takes care of them.

What “Higher Wages” Really Mean

There’s another unspoken reality: cannabis wages are volatile and reactive. When you base your people strategy solely on pay, your culture shifts with the job market.

In contrast, benefits compound over time. A 1–2 % match doesn’t just help employees build personal wealth — it becomes part of your employer DNA.

Higher wages are forgotten. Benefits are remembered.

“But My Team Just Wants Cash.”

If your workforce is used to instability, of course they’ll say they want cash. Short-term thinking is survival.

But when you introduce benefits, you change the narrative from survival to stability.

You prove that employment here isn’t transactional. It’s relational. It’s partnership.

That’s what people crave.

The Paragon + LRS Advantage: Why Integration Wins

Most cannabis employers who try to offer retirement benefits fail because their systems don’t talk. Payroll lives in one silo, HR in another, benefits in a third.

Paragon + LRS solved that.

Payroll and plan communicate seamlessly: contributions flow correctly, compliance is automatic, errors disappear. That’s real infrastructure. That’s legitimacy.

The Founders’ Blind Spot

Founders, this part’s for you.

You’re running payroll, dodging 280E, reinvesting every dollar, and often paying yourself last. You think retirement planning is for employees. It’s not. It’s for you.

A 401(k) or Solo(k) through LRS lets you defer income, reduce taxable exposure, and build a personal wealth safety net — legally.

If you’re taking all the risk, you deserve to build systems that reward it.

What the Numbers Don’t Show: Belonging

Data measures cost. It can’t measure care.

When your team feels seen, valued, and supported, they don’t just perform better — they protect the business.

Belonging is the most valuable retention tool there is, and you can’t fake it with pay raises. You create it by showing people they have a future with you.

That’s what a 401(k) represents — belief made tangible.

The Future of Pay in Cannabis Isn’t Just About Money

The companies that win won’t be those paying the most. They’ll be those paying smartest — balancing fair wages with meaningful benefits.

A raise says, “I hear you.”
A benefit says, “I see you.”

When people feel seen, loyalty becomes effortless.

The Takeaway

Everyone wants to throw more dollars at problems.
But you can’t buy culture with cash.

A legit retirement plan costs less than constant raises, drives retention, and sends a louder message: We’re building something real, and you’re part of it.

Raises fade. Bonuses disappear. Benefits stick.

Be the brand that builds futures, not just checks.

Best Next Steps

1. Audit Your Compensation Strategy
Download six months of payroll data. Compare what you spent on raises and turnover replacements to what a 401(k) match would cost. Paragon + LRS can model this for you in minutes.

2. Start the Conversation Internally
Ask leadership and managers: “What would make people want to grow with us for five years?” You’ll surface insights about trust, security, and belonging — things pay alone can’t fix.

3. Quantify Retention ROI
Use Paragon’s Turnover Cost Calculator to measure what churn really costs. Then use LRS’s Retirement ROI Tool to model savings and tax offsets. Seeing the numbers side by side usually seals the deal.

4. Talk to Your CFO or Accountant
Confirm how employer contributions can be structured under 280E and § 263A rules. If they hesitate, invite an LRS specialist to your next finance meeting—they’ll walk through the compliance framework.

5. Pilot Your First Plan
You don’t have to launch company-wide overnight. Start with a small group or single-location test. LRS handles fiduciary risk; Paragon handles payroll sync. You’ll learn fast, scale smoothly, and build proof points.

6. Educate Your Team
Host a “Money and the Future” session for staff. Let an LRS advisor explain how compound interest and employer matches work in real life. Financial literacy drives engagement.

7. Schedule Your Benefits Audit
Book a free Paragon + LRS consultation. You’ll get a side-by-side projection of wage vs. benefit ROI specific to your operation, entity type, and headcount.