Small Business Owners Need a Nudge to Offer Retirement Plans
A survey reveals points about which small business owners could be educated to incent them to offer retirement plans for employees and save for retirement themselves.
Data gathered by SCORE, a nonprofit provider of mentor services to U.S. small businesses, shows that 34% of small business owners do not have retirement savings plans for themselves, and the fewer employees a business has, the less likely it is to offer a retirement plan for its employees.
Only 28% of businesses with fewer than 10 employees offer retirement plans for employees, 51% of businesses with 10 to 24 employees offer retirement plans, and 63% of businesses with 25 to 49 employees offer retirement plans.
Seventy-one percent of businesses that do not offer retirement plans report that plan setup is too expensive, and 63% say they do not have the resources to administer such plans. Half contend their employees are not interested, although SCORE found 48% of departing employees said a lack of retirement benefits influenced their decision to leave. Twenty-two percent have not thought about offering a retirement plan to employees.
According to SCORE, small business owners may change their tune if they knew retirement savings only cost employers 2.4% of an employee’s compensation, on average, and retirement plans support employee recruitment and retention. Ninety-four percent of small business owners that do offer retirement plans report that these plans drive recruitment and retention.
As for their own retirement savings plans, 37% of business owners report they lack the profits to save for retirement, and 21% used their previous retirement savings to invest in their own business. Eighteen percent plan to sell their business to fund their retirement. In addition, 12% do not have any plans to retire, and 12% say they do not see the need to save for retirement.