The Eighth Annual Transamerica Retirement Survey has found that small businesses continue to operate at a disadvantage when it comes to retirement savings compared to their larger counterparts. When compared to employees at large companies, small business employees are less likely to have access to a 401(k) or employee-funded retirement plan, and are less active than their large company counterparts in saving for a comfortable retirement. The problem for small business employees is that this translates to lower household retirement savings and a greater number who expect to rely on Social Security as their primary form of income in retirement.
The report cites access to retirement plans as a major reason for the gap. Only 65% of small business employees report being offered an employee-funded retirement plan, compared to 84% of employees at large companies. Meanwhile, 20% of small business employees reported not receiving any form of retirement benefit from their employer.
On the flip side, small business employees are also dropping the ball. When offered a plan, small business employees are less likely than employees of large companies to participate or have money invested in the company’s plan, while also contributing a slightly lower percentage of their salary. Moreover, small business employees are also less likely to be saving outside of work. Of those small business employees that aren’t currently participating, 31% don’t plan to in the future.
Unfortunately, it does not look as though things will get better anytime soon. Nearly 73% of small businesses that don’t currently offer a retirement plan indicated through the survey that they weren’t likely to in the near future. The four most common reasons given by employers for not likely offering a plan in the next two years were:
- Company is not big enough – 43%
- Lack of management – 41%
- Employee interest – 34%
- Cost concerns – 34%