It’s not just the big corporations that need to offer a retirement plan to employees. Even small business owners can, and should, should set up a retirement plan, according to Los Angeles-based Capital Group.
“Offering a retirement plan to one’s employees can be a critical asset for a business owner who wants to retain and attract new talent, but concerns about cost and a lack of sufficient guidance are holding many of them back,” Renee Grimm, senior vice president, retirement plans at Capital Group, said in a statement.
“With the passing of the SECURE 2.0 ACT Act earlier this year, now may be a great time for small business owners to set up a retirement plan. A financial adviser can guide business owners on how to maximize the full benefits of offering a plan, including important tax credits for themselves,” Grimm added.
As the McKnight’s Business Dailly previously reported, many American workers could be woefully short of the funds needed later to pay for home care, senior living or skilled nursing facility care, according to a report by the nonprofit Transamerica Center for Retirement Studies in collaboration with Transamerica Institute.
SECURE 2.0 is meant to take the Secure Act, signed into law in December 2019, a step further in helping working Americans save for retirement savings.
According to a Capital Group survey of more than 600 small business owners and their employees, business owners offering retirement plans were more aware and sympathetic to their employees’ financial situations. For example, 71% of business owners who offer a retirement plan reported inflation was their employees’ biggest financial challenge, with 79% of employees agreeing. At the same time, only 28% of owners who don’t offer a plan appeared to understand inflation/cost of living to be the primary factor affecting their employees’ finances, compared with the 81% of employees who reported this as their biggest challenge.
Seventy-three percent of small business owners that offer a retirement plan ranked helping their employees save for the future as the primary reason for offering a plan, over other reasons such as retaining current employees (49%) and reducing their company tax liability (23%).
Data show that many business owners that do not offer a retirement plan may be unaware that their employees want one, particularly a plan with a company match feature.
“Too many people in this country are not saving enough for retirement, including many who work for the very small businesses which are the engine of our economy. The passing of the SECURE 2.0 Act will remove the last barriers for many, enabling employers and the retirement industry to come together to help more Americans save for retirement,” said Ralph Haberli, head of institutional retirement at Capital Group. “Additionally, while 12 states have enacted legislation requiring small businesses to offer retirement plans, there appears to still be low awareness of the range of affordable solutions available.”
Capital Group encourages employers to consider the full range of benefits related to setting up a retirement plan. In addition to helping employees save for the future, setting up a retirement plan can be a means of attracting and retaining talent to stay competitive and potentially saving money by taking advantage of new and enhanced startup tax credits, the company said.
