• Aaron Wassenaar

Are Retirement Plan Misconceptions Hurting Small Business


In the world of retirement planning, perception and reality often travel different roads. For many years, EBRI’s Retirement Confidence Survey has spotlighted the mismatch between American workers’ beliefs about retirement and their preparations for it. For example, in 2018, 64 percent of workers said they were confident about living comfortably in retirement. Yet, only 38 percent had tried to figure out how much they needed to save to do that.


A newly released survey from Millennium Trust identified a similar perception gap among smaller employers. Many believe that sponsoring a retirement plan is simply too expensive, but relatively few have researched how much a plan would cost.


According to the survey, in 2018, 66 percent of participating employers said cost was the biggest barrier to offering a retirement savings plan, yet 45 percent had never researched any type of retirement plan. And, only 23 percent had explored plans beyond a traditional 401k.


Small employers are missing out on a tool that helps attract and retain talent


Employers may be losing valued employees and not attracting new talent because companies that don’t offer retirement plans can be less appealing to employees than companies that do—especially in today’s day and age with an increased cost of living and longer lifespans.


One-third of employers surveyed said retirement savings plans were not very or not at all important to their employees, and about one-fourth (26 percent) somewhat or strongly disagreed that having a retirement savings plan would help their companies attract and retain talent.


Small employers are the front line in America’s retirement crisis


One point on which employers and employees agreed was that Americans are not saving enough for retirement and many people will be unable to maintain their current lifestyles in retirement. The predominant way in which Americans save for retirement is through employer-sponsored retirement plans, but not everyone has access to one. In March 2018, 58 percent of full-time workers in private industry had access to defined contribution plans, like 401k, SEP, and SIMPLE plans. The percentage was lower (46 percent) among employers with fewer than 100 employees.


If we are going to overcome the retirement crisis in the United States, we need to educate smaller employers about affordable retirement savings plan options that are less onerous to administrate than 401k plans.