Only One-Third of Small Businesses Offer Employees Retirement Plans

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Only one-third of small businesses offer their employees retirement plans, providing an opportunity for some small business owners to lure top-notch job candidates in a tight labor market. 

Key Takeaways

  • Only one-third of small businesses offer retirement plans, with most owners saying they can’t afford it.
  • More than 8 in 10 small business owners said they can’t match the benefit packages offered by big companies.
  • Most small business owners that offer retirement plans do it to benefit employees, but more than half also said that employee recruitment is a factor.

Most small business owners said they could not afford a retirement plan for employees, according to Fidelity Investment’s 2023 Small Business Retirement Index. The survey of 504 owners of businesses with fewer than 100 employees found while inflation remains business owners' top worry, another 37% said employee recruiting and retention was a top concern.

“In addition to helping their employees establish a secure financial future, a retirement benefit also can have an enormous impact in attracting and retaining top talent,” said Andrew Schreiner, Fidelity senior vice president for small business retirement.

Last week’s job report showed unemployment was still low and employers are still looking for help. The Fidelity report underscored the opportunity for small business owners, as 73% said they weren’t able to compete with large companies, with another 82% of owners specifically pointing to benefits packages as one area where they can’t match up.

As many as half of all American workers are employed by a small business, Fidelity said.

Americans Have At Least 120 Million Retirement Accounts

Besides being a recruitment tool, many small business owners provide retirement benefits because they want to help their employees. Of the 34% of small business owners offering retirement plans, 63% said they offer the plans because it’s the right thing to do, while another 53% said their employees appreciate and expect the benefit, and 51% said the plan helps recruit employees. 

The benefit is not just too expensive, the survey shows, but 21% of owners said they don’t know how to set the plans up, and 22% said they were too busy to focus on the process of setting up retirement investment accounts for their employees. 

Overall, 68% of private sector workers had access to a retirement plan, with 51% choosing to enroll, according to the Bureau of Labor Statistics showed. At least 60 million Americans had a 401(k) account, with another 60 million contributing to an Individual Retirement Accounts, according to the Investment Company Institute.

Retirement accounts make up a significant portion of equities markets, with Investment Company Institute data showing 90% of participants in 401(k) plans used it to hold stocks, and more than four in 10 plan owners had at least 80% of their 401(k) accounts in stocks.

Article Sources
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  1. Fidelity Investments. “Fidelity Study: Despite Concerns About the Future, Two-Thirds of Small Businesses Do Not Currently Offer Retirement Savings Benefits.”

  2. Fidelity Investments. “FACT SHEET: 2023 Small Business Retirement Index.”

  3. Bureau of Labor Statistics. “68 percent of private industry workers had access to retirement plans in 2021 : The Economics Daily.”

  4. Investment Company Institute. “Main Street Owns Wall Street.”

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