A new study finds that an increasing number of small businesses see 401(k) plans as an effective tool to attract and retain talent.
The Spark 401k Small Business Retirement Planning Index showed that 94 percent of small business owners (SBOs) who offer a 401(k) said it drives employee recruitment and retention, up from 89 percent in 2013. Further, 86 percent of SBOs with a plan are confident they are saving enough for retirement, an increase from 82 percent in 2013.
The data also revealed some misperceptions about 401(k) retirement savings plans. The survey showed that 59 percent of owners who do not offer 401(k) plans believe their business is too small to set one up, while 22 percent said they cannot afford matching contributions, and 16 percent believe plan costs are too high. Nearly half (47 percent) of all SBOs are saving less than 10 percent of their income for retirement, with a quarter saving nothing at all.
“While it’s encouraging to see more small businesses reaping the benefits of 401(k)s, it’s clear misperceptions and myths are preventing many owners from starting a retirement plan,” Stuart Robertson, president of Capital One Advisors 401k services, which oversees Spark 401k’s plans, said. “We want every business owner, including the self-employed, to know that no business is too small for a 401(k), contribution matching is not required, and low-cost plans are available.”
The survey said 31 percent of SBOs without a plan said they would consider offering a 401(k) if tax benefits existed and 27 percent would reconsider if plan costs were lower.
“Meaningful tax benefits and low-cost all-ETF 401(k)s that keep investment expenses under one percent are available, and can empower more Americans to affordably build their nest egg, providing them options on how they want to spend their retirement years,” Robertson said.
The survey polled 500 U.S. business owners at companies with 1-50 employees between May 5th and 18th, 2017.