At a time when many companies are beefing up their 401k benefits to attract and retain employees in a tight labor market, 74% of small businesses are still going without any plan at all, according to new research commissioned by ShareBuilder 401k.
The research, conducted by Wakefield Research between March 25-31, 2022, found that most small business owners believe their business is too small and that 401k plans are too costly.
The survey, which polled 500 small business owners (SBOs) from across the country, reveals that only 26% currently offer a 401k plan. Responders cited three main reasons for not starting a plan:
“This new survey data indicates that, as a society and industry, we have to do a better job of educating the market and debunking misperceptions.”
Stuart Robertson, Sharebuilder 401k
• 58% believe their business is too small to qualify for one
• 32% say they can’t afford a matching contribution
• 24% believe they are too expensive to set up and manage
“The truth is that any business, regardless of size—and including the self-employed—can offer a 401k plan. There are very affordable, low-cost options, and matching is not required,” said Stuart Robertson, President and CEO of ShareBuilder 401k. “This new survey data indicates that, as a society and industry, we have to do a better job of educating the market and debunking misperceptions.”
Among the small businesses with a plan, the top reasons they started a 401k provided some positive insights. The findings are as follows:
• 71% said they felt a personal responsibility as a business owner to provide one
• 47% said they thought it helped their business attract and retain employees
• 26% wanted to receive the tax benefits of a 401k
• 21% wanted to save for their own retirement
However, the survey found that many other misperceptions still seem to be prevalent. Among the most problematic was the belief that 10% in investment expenses is a fair amount.
“Investing can feel intimidating or opaque, and it’s important for employers and employees to know to try keep all-in in investment expenses under 1%—this includes fund expenses and investment management,” Robertson said. “The difference of paying 1% more in investment expenses over a 40-year career can result in a nest egg that is hundreds of thousands of dollars less which can truly impact your retirement. Every dollar spent on expenses is one less dollar invested in the markets.”
Founded in 2005 and now serving more than 6,500 businesses across the U.S., Seattle-based ShareBuilder 401k is a digital 401k provider specializing in low-cost, all-ETF retirement products and resources for small- to mid-sized companies, including owner-only businesses.
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