The survey found that an overwhelming percentage of the nation's micro- businesses - 80% - do not offer retirement plans of any type for either owners or employees. The greatest barrier, reported by 62 percent of respondents, is the cost of administering and contributing to a retirement plan. More than one-third of micro-business owners acknowledged they were not saving for retirement at all.
"These findings show us that this segment of America's business community - which represents about 20 million businesses – is contributing mightily to the economy, but not to the future of its own people," said Kristie Darien, Legislative Director for the NASE. "Micro-business owners and the self- employed face so many challenges, including soaring health care costs, and as a result retirement planning is overshadowed by those more immediate needs."
Of the respondents who do provide a retirement savings plan, more than half shoulder the administrative duties themselves. This arrangement places the responsibility of choosing and administering the plan on the business owner, who often is working long hours to maintain and grow the business.
The survey also found that the gap between what many business owners say they will need for retirement and what they actually have saved is considerable - nearly 13 percent have no savings at all, and 26 percent have less than $50,000 saved. However, nearly 29 percent believe they will need at least $1 million in savings before they can retire.
"This gap is striking," said Darien, "it shows how retirement often takes a back seat to other employee benefits such as health care and incremental wage increases, often at the risk of the financial security of the business owner who has invested so much time and energy in nurturing the enterprise."
Chances are your retirement income will come from several different sources, including Social Security and savings in retirement plans. However, over three-quarters of micro-business owners are relying on the federal government as their primary source for financing retirement. "Social Security is the most frequently mentioned retirement income source, but it's unlikely to pay all of your retirement living expenses, even if the system remains solvent," Darien remarks.
Other retirement plans, such as an IRA, Simplified Employee Pension (SEP) and individual 401(k), have become more popular with micro-business owners. The NASE advises its members to explore all retirement options before deciding which option is best for you.
Other Notable Findings:
- The average preferred retirement age is 62 years, but the expected age for having sufficient retirement assets is 67 years.
- One in five micro-business owners are unsure of the age at which they will have sufficient assets to retire.
- 5% of micro-businesses say they plan to offer a retirement plan in the next 12 months.
- Most of the plans (63.4%) cover ONLY the owner/operator, but nearly one in three owners exclude themselves from the retirement coverage, opting instead to provide employee-only coverage;
- A Simplified Employee Pension plan (SEP) is by far the most common form of plan offered by micro-businesses.
- While finding information on retirement options is easy, only 40% are familiar with and understand the options available.
- More than 90% of those with a retirement plan through their business are presently saving for their own retirement, versus only 57% of those without a retirement savings plan through their business.
