A Fidelity Investments survey of small business owners found that more than half, or 53 percent, of the nation’s 6 million small businesses may not have the retirement plan that best fits their needs. It also found that small business owners are struggling to understand the features and benefits of their current retirement plans.
The survey, of more than 500 small business owners, tried to gauge their understanding of SEP-IRAs, Simple-IRAs and Self-Employed 401(k) plans. The results highlighted the education gap that many small business owners face with their current plans.
Half of those surveyed who use a Self-Employed 401(k) did not know the maximum annual employer contribution allowed for this plan. Sixty percent with SIMPLE-IRAs were not aware that employer tax filing is not required. More than half, or 55 percent, using SEP-IRAs did not know that the plan is funded solely by employer contributions.
“With the April tax filing deadline just around the corner, now is an ideal time for small business owners to reassess their retirement plans and determine if they meet their needs,” said Ken Hevert, vice president of Fidelity Investments. “To ensure small business owners are in the best plan, Fidelity works closely with them to evaluate their specific retirement savings goals through one-on-one guidance with our investment professionals and educational content online.”
One hundred small business owners who do not have a retirement savings plan also were surveyed. The top reason (34 percent) cited for not having a retirement plan is the perception that it is too expensive.
“Our study found that three-quarters of small business owners believe a retirement plan will help them retain employees, so it’s important they select the plan that is not only best for them, but also for their employees, “said Hevert. “To this end, it’s critical to factor in the number of employees who will be participating in a potential plan, as well as the funding responsibilities of the employer, contribution limits and plan administration details.”
Fidelity Investments provides financial services, with assets under administration of $3.4 trillion, including managed assets of $1.5 trillion, as of Dec. 31, 2011.