There are currently more than 40 million Americans who do not have a retirement plan offered to them in the workplace. According to the U.S. Small Business Administration the majority of those without a workplace option are employed by small businesses and those with less than 100 employees. As a result, many Americans do not have the tools available to them to start a retirement savings program. Unfortunately, there is some misinformation and myths that persist among many small business owners. Here are the five we hear the most:
Starting and then running a retirement plan is too complicated without an HR Department to run it
This may have been true in the past, but not anymore. There are a number of great providers who help with much of the administrative activities required of a plan sponsor. Your financial advisor can work to guide your employee education program.
It isn’t worthwhile to offer a 401k plan if I only have a few employees
No business is too small. At Magellan Financial we work with both large and small employers. There are even Solo 401k plans available for individuals who are self-employed and have no additional employees.
I shouldn’t offer a plan because I can’t afford to match contributions
While an employer matching contribution can be a great motivational tool for employee participation, there is no rule that says you have to offer an employer match.
My employees won’t participate because they don’t make enough money
In some cases this may very well be true, as there are families that are living too close to the financial edge for one reason or another. In our experience, however, these cases are more of the exception and not the rule. When employees receive workplace education on saving for retirement and how to participate in the plan, many decide to start saving. There are no minimums on how much an employee can start saving, and an employer match can be used as a savings enticement.
Management fees are too expensive
The cost of running a 401k plan depends on a number of variables. There are, however, providers who specialize in plans for small businesses that are priced competitively. Depending on the situation, an employer might opt to offer another retirement plan offering such as a SIMPLE IRA, which is similar to a 401k plan, but less expensive to administer.
Once the myths are dispelled it should be easy to see the benefits of an employer sponsored retirement plan for even the smallest of business entities. For the business owner it is a great way to save for your own retirement while giving your employees an additional benefit. A company-sponsored retirement plan empowers the employees to save for their own retirement while receiving the advice of a financial advisor in structuring their investments.
Please contact us at 610-437-5650 for a complimentary 30-minute consultation to discuss retirement plan options for your company or review your current plan. Check out or Comprehensive Services page to learn more about our services for both business owners and individuals.
Magellan Financial, Inc. does not act as a fiduciary and is not engaged in rendering legal, accounting or tax advice. If legal or tax assistance is required, the services of a competent professional should be sought.