Client Service May 9, 2019

Majority of Small Business Owners Feel Unprepared to Make Benefit Decisions

While more than half view retirement benefits as a “must have,” they are unprepared to make selections and could use the help of an adviser, Lincoln Financial Group says.

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In today’s tight labor market, more than half of small business owners view retirement plans as a “must have” benefit to retain employees, according to a survey by Lincoln Financial Group. However, 93% feel unprepared to make decisions about setting up a retirement plan, indicating that they could use the help of an adviser.

Seventy percent of employees at small businesses are concerned about planning for retirement, but only 42% of these companies offer retirement benefits.

“The good news is that small business owners recognize the importance of offering retirement benefits, but there are still some barriers preventing them from taking action,” says Jamie Ohl, executive vice president, president of retirement plan services at Lincoln Financial Group. “Offering a comprehensive plan doesn’t have to be complicated. It only takes a conversation with a financial adviser and a few simple decisions for a small business owner to set up a new plan or enhance the one they offer today.”

The survey also found that 69% of small business owners are worried about having the resources to administer additional benefits. Lincoln Financial recommends that they meet with a financial adviser to help them find the best solutions for their company, as well as help them with tax implications and plan design. Advisers can also help small business owners assess current benefits, assign value to new benefits, administer the plan and educate employees about its benefits.

“Financial advisers and plan providers like Lincoln can help by serving as a consultative partner, helping small business owners understand solutions, make the right selections based on employees’ needs and helping them educate their employees,” Ohl says.

The survey also found that small business owners are concerned about participation in their retirement plan. Lincoln Financial says that educating participants about the benefits of the plan can boost participation. Seventy-nine percent of retirement plan participants wish they had a better understanding of the elements of saving for retirement, and only 42% say they are saving as much as they should.

Lincoln Financial’s findings are based on an online survey of 675 small business owners conducted by Collage Group last August.

Lincoln Financial’s survey echoes the results from another recent survey by SCORE, a nonprofit provider of mentor services to U.S. small businesses. That survey found that fewer, 34%, of small businesses do not have retirement savings plans.

Like the Lincoln Financial survey, the SCORE survey found that 71% of businesses that do not offer a retirement plan said it is too expensive to set up, and 63% said they do not have the resources to administer such plans.

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Data & Research May 8, 2019

Pre-Retirees Overestimate Social Security Benefits by 28%

Just over one-quarter of adults think they can live comfortably on Social Security alone, according to a survey by the Nationwide Retirement Institute.

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Pre-retirees, those within 10 years of retiring, expect they will receive $1,805 a month in Social Security benefits, but retirees actually collect an average of $1,408, a 28% difference, according to the sixth annual survey by the Nationwide Retirement Institute. Twenty-six percent believe they can live comfortably on Social Security alone, and 44% say that it will be their main source of retirement income.

Seventy percent think they are eligible for full benefits before they actually are. On average, they incorrectly think they will be eligible for full benefits at age 63, and 26% think that even if they claim early and receive lower benefits, these benefits will rise once they reach full retirement age.

On average, retirees say they began collecting Social Security at age 62. The reason they gave for taking Social Security benefits early were to pay for living expenses (61%), to supplement their income (36%), or because they faced health issues (22%).

Future retirees plan to begin collecting benefits at age 65, thereby forgoing higher Social Security benefits were they to wait until age 70. Recently, a professor at the UCLA Anderson School of Management discussed biases that discourage employees from waiting to claim Social Security and potential messaging to address those biases.

“Social Security is one of the most confusing retirement topics that America’s workers are facing today,” says Tina Ambrozy, president of sales and distribution at Nationwide. “Our survey reveals that fewer than one in 10 older adults know what factors determine the maximum Social Security benefit an individual can receive.”

Sixty-six percent of future retirees worry about Social Security running out of money in their lifetime. Forty percent think there will be cuts under the current administration, and 83% think the Social Security system needs to be reformed.

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Among those who recommend changes to the Social Security system, 53% think higher earners’ taxes should increase. Even those with more investable assets agree. Fifty-five percent of those with $250,000 or more and 48% of those with $1 million or more believe higher earners’ taxes should increase.

“Many people feel the best way to improve the Social Security program is to raise taxes on high earners to increase funding,” Ambrozy continues. “Interestingly, our survey reveals that 69% of future retirees were surprised to find out a person making $150,000 a year pays as much in Social Security taxes as millionaires.”

Only 22% of future retirees have a formal, written retirement plan, and 33% say they did less Social Security planning because it is too confusing.

Thirty-seven percent of future, 28% of recent and 30% of longer-term retirees work with a financial adviser. They say they receive 15% more in benefits ($1,551 versus $1,324). Forty-six percent of future retirees working with an adviser have discussed Social Security strategies with them.

Among those working with an adviser who have not received advice on Social Security, 34% say they expect to receive such advice. Seventy-six percent say that if their adviser did not speak with them about maximizing Social Security benefits, they would switch advisers.

The Harris Poll conducted the online survey for Nationwide in February among 1,315 adults.

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