America's Small Business Failing to Meet Retirement Needs of Their Owners and Employees According to Nationwide Survey
Nearly Half of Small Business Owners Are Not Confident about Their Own Retirement Savings;
Only 17 Percent Say They Feel an Obligation to Offer Retirement Benefits to Employees
BELLEVUE, WA. A recent survey conducted by Harris Interactive Ò on behalf of ShareBuilder 401(k) ( www.sharebuilder401k.com ) found that just 14 percent of America's small business owners offer a 401(k) plan and 63 percent do not offer any form of retirement benefits to their employees. This is despite that fact that when it comes to their own personal retirement security, nearly half (47 percent) indicated they are not confident that they are prepared for retirement.
Surprisingly, few small business owners consider it their responsibility to help their employees prepare for retirement. Just 17 percent of small business owners responded that they felt a strong obligation to offer retirement benefits (a 401(k) or other retirement plan). In fact, 46 percent reported that they felt no obligation at all.
"There are millions of small businesses in this country and the idea that 63 percent of those we polled offer no retirement benefits is alarming," said Jeff Seely, chairman and CEO of ShareBuilder Corporation. "Small businesses employ half of all private sector employees in America and serve as our economy's growth engine. Given the rising cost of healthcare, uncertainty about Social Security, and longer life expectancy, it's imperative that America 's small business owners understand their crucial role in addressing the looming retirement crisis."
When asked why they plan to never offer retirement benefits, the majority of survey respondents cited not having enough employees to make it worthwhile (54 percent), followed by the inability to afford a company match (28 percent), unstable business circumstances (26 percent), lack of employee interest (15 percent) and a short-term employee base (15 percent). While costs appears to be a hindrance for some, 63 percent of respondents said they had no idea what a 401(k) plan would cost to administer.
Sole proprietor businesses with no employees are the least likely to have a 401(k) plan in place. Just 6 percent utilize a 401(k) product compared with 52 percent of companies that have between 26-50 employees. In fact, the larger the business, the more likely they are to say they will offer a 401(k) plan in the future if they do not currently offer one. Among those not already offering a 401(k), 65 percent of sole-proprietors say they will never utilize a 401(k) while just 17 percent of businesses with between 26-50 employees say they will never enact a 401(k) plan.
"We are concerned that there are misperceptions among America's small business owners about 401(k)s. Too many believe that you have to be a much larger company to afford a sophisticated retirement plan or even that you have to offer a company match, when that's just not the case," said Stephan Roche, vice president and general manager, ShareBuilder Small Business Group. "There seems to be a critical lack of knowledge here. Even sole proprietors can, and should, consider a 401(k) for retirement savings."
Aside from helping America's small business owners and their employees prepare for retirement, 401(k) plans are also considered a competitive advantage. Of those small businesses that do offer 401(k) plans, 70 percent reported they are important in attracting and retaining employees. According to the survey, 72 percent claimed that over 90 percent of their employees contribute to their retirement plans.
Here are some additional findings from the study:
- More than half of small business owners plan to retire after age 65 or never (55 percent). Only 21 percent plan to retire at age 65 or before.
- While about one-third (32 percent) of small business owners are likely to sell their business to help fund their retirement, approximately six in 10 (62 percent) are not.
- Before they ran their own business, 65 percent of those surveyed previously had retirement benefits offered by their employers.
- Six out of 10 (60 percent) surveyed also said their parents had retirement plans or pensions.
- Seventy percent of small businesses do not offer health care coverage for their employees.
- Among those who do offer retirement benefits, 69 percent have offered them for five years or longer.
- Only 37 percent of small business owners say they have talked to their employees about whether they would want a retirement benefits plan or the options they would prefer with such a plan; six in 10 (63 percent) have never done so.
- Sixty-one percent of those surveyed have not heard of the Pension Reform Act; among those who have heard of the Pension Reform Act, 76 percent say it has no impact on their likelihood to offer a 401(k) plan.
- Of those not currently offering 401(k) plans, more than half (53 percent) say they will never offer it while three in 10 (30 percent) say they were unsure.
- 63 percent of those who do not have a 401(k) plan were unsure about how much the administration fee would be for offering such a plan at their company.
- One-third (33 percent) of companies that have a 401(k) plan offer some form of a company match to employee contributions to encourage employee participation.
About the ShareBuilder Small Business Annual Retirement Trend (SBART) Survey
The 2006 ShareBuilder Small Business Annual Retirement Trend (SBART) Survey is the company's first annual survey conducted to measure small business owner's attitudes, preferences, and needs for retirement benefits, both for themselves and their employees. The survey also examines current topics in retirement benefits.
This survey was conducted online within the United States by Harris Interactive on behalf of ShareBuilder 401(k) between Oct. 4-23, 2006 among 507 small business owners or small business CEO's/Presidents (aged 18 and over) who employ 50 employees or fewer, including one-person, owner-operated businesses. Companies were weighted by number of employees in order to represent actual proportions in the population.
With a pure probability sample of 507, one could say with a ninety-five percent probability that the overall results would have a sampling error of +/-4.4 percentage points. Sampling error for data based on sub-samples may be higher and may vary. However, that does not take other sources of error into account . This online survey is not based on a probability sample and therefore no theoretical sampling error can be calculated.
About ShareBuilder 401(k)
ShareBuilder 401(k) provides easy, affordable and smart 401(k) retirement plans for small businesses, ranging from the self-employed to those with 25 or even more employees. As part of ShareBuilder Corporation, which operates ShareBuilder.com, a leading online brokerage, ShareBuilder 401(k) offers a suite of on-demand services that make it simple for employers and employees to open and manage their retirement plans online. ShareBuilder 401(k) plans provide market-efficient investments and model portfolios that make it easy for employees to select the right investments to help them achieve their retirement goals. Customers can also take advantage of ShareBuilder 401(k) Consultants, Customer Success Managers, and Customer Care Agents to receive assistance in choosing and managing their retirement benefits.
ShareBuilder Advisors, LLC, is a registered investment advisor and a subsidiary of ShareBuilder Corporation.
ShareBuilder ( www.sharebuilder.com ) is an online brokerage designed to make investing in the stock market simple and affordable for both beginning and experienced investors. The company vision is to increase the personal savings rate of the average American by helping people build and manage wealth over the long term. Customers pay low fees on individual transactions, have no account or investment minimums and can choose from three automatic, dollar-based investing programs.
Stuart Robertson, ShareBuilder Advisors, LLC