In Practice December 13, 2006

Small Business Owners Not Likely to Offer Retirement Benefits

The 2006 ShareBuilder Small Business Annual Retirement Trend (SBART) Survey found that 63% of respondents do not offer retirement benefits to their employees and more than half (63%) do not know what a 401(k) plan would cost to administer.
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According to a ShareBuilder press release, only 14% of small businesses surveyed offer a 401(k) plan to employees. Nearly half (46%) said they felt no obligation to offer retirement benefits to employees, while just 17% said they felt a strong obligation to do so.


Of those not offering a 401(k) plan, 53% said they would never offer one and 30% were unsure. However, before they ran their own businesses, most small business owners (65%) had retirement benefits offered by their employers.

 Reasons cited by respondents for planning to never offer retirement benefits included: 

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  • not having enough employees to make it worthwhile (54%),
  • the inability to afford a company match (28%),
  • unstable business circumstances (26%),
  • lack of employee interest (15%), and
  • a short-term employee base (15%).

 

 In addition, 61% of those surveyed said they have never heard of the Pension Protection Act. Of those that have heard of the legislation, 76% said it had no impact on their likelihood to offer a 401(k) plan.

 

 

Other SBART findings included:

  •  47% of small business owners surveyed indicated they are not confident they are prepared for retirement, and 
  • 70% of respondents do not offer health care coverage to their employees.

The survey was conducted online within the US 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.

 

 

Data & Research December 13, 2006

Forced Retirement Another Factor in Retirement Planning

In addition to savings and investment considerations, a new survey suggests that part of a healthy retirement plan will include a consideration of early retirement because not all Americans will be able to work as long as they plan.
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According to a press release from Sun Life Financial, its survey found 22% of retirees were forced into retirement before they had planned, on average approximately eight years earlier than expected. In addition, the average respondent planned on accumulating approximately $1 million in retirement savings, but had accumulated only about half that amount when they were forced to retire. Fifty-five percent of survey respondents said they were ineligible for Social Security benefits at the time of involuntary retirement.

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Additionally, 69% of respondents said their retirement plans overall had been affected by involuntary retirement, requiring them to reduce expenses or change their lifestyles, the release said. Lifestyle and financial adjustments respondents said they made to address their unexpected retirement included:

  • reducing expenses (61%),

  • fewer vacations and social activities (47%),

  • collecting social security before they wanted to (43%), and

  • using money from a 401(k) or IRA (30%).

Health care expenses for themselves and/or their spouses was the most urgent financial obligation to be addressed beyond living expenses, cited by 53% of respondents age 65 and older.

Reasons for forced retirement most commonly cited by respondents included layoffs/downsizing (44%), personal illness (32%), and injury (14%). A higher percentage of women cited family obligations (10%) as a retirement cause compared to men (2%). Respondents age 65 and older were more likely to cite layoffs/downsizing (58%) as the primary reason for having to retire earlier than planned, while respondents under age 55 were more likely to name personal illness (46%) or injury (26%).

The survey was conducted online within the US from May 16 to May 30, 2006 among 701 adults (aged 18+) who had experienced involuntary retirement, were responsible for, or shared in, the household’s financial decisions, and were currently working with a financial adviser.

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