Many experts recommend saving 10% to 15% of pretax income annually for retirement. But while Americans accumulate the majority of their retirement funds through employer-sponsored defined-contribution plans, according to a report from the Pew Charitable Trusts, many small business owners and their employees are not afforded this option.
A 2017 survey of small business owners found that 34% of small business owners do not have a retirement savings plan for themselves. In addition, in 2015, the Social Security Administration reported that small businesses are the least likely to provide their employees with retirement options; while 87% of businesses with more than 100 employees offer retirement plans, just 28% of businesses with fewer than 10 employees did so.
The most common reasons for not offering a retirement plan cited by small business owners in the Pew report were the expense of starting a plan, the lack of resources for administering a plan, and a perceived lack of interest from employees.
However, starting a retirement savings plan for your small business can be easier than you might think. Tax credits and incentives are available and can offset the costs of starting a retirement plan. Once the plan is established, employer contributions also are tax deductible.
In addition, a retirement plan is also one of the most desirable employee benefits, so offering one may help you attract and retain qualified employees, reducing turnover.
Small business owners who are interested in establishing a retirement plan have a number of options, including IRA-based plans, defined contribution plans, and defined benefit plans. The IRS and SCORE offer many helpful resources describing and comparing the various retirement plan options.
For more information about retirement plan benefits and options for your small business, join us on Tuesday, Oct. 1 for Choosing a Retirement Solution for Your Small Business, presented by Scott Miller of the U.S. Department of Labor’s Employee Benefits Security Administration.
This session is part of NaperLaunch’s 6th annual Entrepreneurs Week, a series of workshops focused on educating and guiding startup and experienced entrepreneurs. For more information, visit www.naperlaunch.org/entrepreneurs-week.
Choosing a Retirement Plan for Your Small Business. SCORE.org. 15 May 2019.
Dushi, Irena, Howard M. Iams, and Jules Lichtenstein. Retirement Plan Coverage by Firm Size: An Update. Social Security Bulletin 75(2): 2015.
One-Third of Small Business Owners Don’t Have Retirement Savings Plan. Manta 11 Jul. 2017.
O’Shea, Arielle. How Much Should You Save for Retirement? NerdWallet. 8 Aug. 2017.
Small Business Views on Retirement Savings Plans. Pew Charitable Trusts. Jan. 2017.
U.S. Department of Labor Employee Benefits Security Administration and Internal Revenue Service. Choosing a Retirement Solution for Your Small Business. IRS.gov. Oct. 2017.