New study shows small business owners
recognize the benefits of 401(k)s, but most don't think
they qualify for a plan
SEATTLE – July 11,
2017 – Increasingly small businesses are looking to 401(k) plans to attract and
retain talent and boost confidence about their future, according to the Spark
401k Small Business Retirement Planning Index.
The national survey
of small businesses found 94 percent of small business owners (SBOs) who offer
a 401(k) say it drives employee recruitment and retention, up from 89 percent
in 2013; and 86 percent of SBOs with a plan are confident they are saving
enough for retirement, an increase from 82 percent in 2013.
misperceptions about plan access and costs prevent many SBOs from investing. The
survey showed that 59 percent of owners who don't offer 401(k) plans believe
their business is too small to set one up, 22 percent say they can't afford matching
contributions, and 16 percent believe plan costs are too high. Nearly half (47
percent) of all SBOs are saving less than 10 percent of their income for
retirement, with a quarter saving nothing at all.
"While it's encouraging to see more small businesses
reaping the benefits of 401(k)s, it's clear misperceptions and myths are
preventing many owners from starting a retirement plan," said Stuart Robertson,
president of Capital One Advisors 401k services, which oversees Spark 401k's suite of all-ETF
401(k) plans. "We want every business owner, including the self-employed, to
know that no business is too small for a 401(k), contribution matching is not
required, and low-cost plans are available."
are key themes uncovered by Spark 401k's Small Business Retirement Planning
rates are down, despite many SBOs feeling confident about their retirement
62 percent of SBOs say they're confident they're saving enough for retirement, nearly
half (47 percent) are saving less than 10 percent of their income and one-quarter
aren't saving at all.
SBOs are saving less than they did four years ago – 47 percent have saved a
nest egg of $100,000 or more, compared to 59 percent who saved at least that
amount in 2013.
increases when SBOs have a 401(k) plan; 86 percent with a 401(k) are confident
they are saving enough for retirement.
SBOs are more likely to say a 401(k) has boosted their confidence (55 percent),
compared to male owners (47 percent).
support employee recruitment and retention, and help boost the bottom line.
percent of SBOs who offer a 401(k) say it drives recruitment and retention, and
about half report it helps attract better quality employees (52 percent) and inspire increased employee engagement (47 percent).
quarter (27 percent) of SBOs who offer a 401(k) say employee demand played a
role in establishing a plan (up seven percentage points from 2013).
Half (48 percent) of SBOs with 2-50
employees say departing employees have said a lack of retirement benefits
influenced their decision, and those owners say it costs a quarter (26 percent)
of the employee's salary to replace them.
third of owners with a 401(k) say it has reduced personal taxes (35 percent)
and business taxes (31 percent).
and misperceptions about plans continue to prevent many from setting up a
SBOs (59 percent) without a 401(k) think their company is too small to offer a
plan, and two-thirds (67 percent) of owner-only businesses believe they're too
small to access a plan, as do 54 percent of business with two to 50
a quarter (22 percent) of SBOs who don't offer a plan say they can't afford
matching contributions and 16 percent think plan costs are too high.
than a third (39 percent) of SBOs plan to fund their retirement by selling
their business. More than half (52 percent) of SBOs with revenues of $500,000
or more say they'll sell their business to fund retirement.
quarter (23 percent) of SBOs believe five to nine percent is a fair amount to
pay in 401(k) expenses; only 10 percent think fees of one percent are fair.
third (31 percent) of SBOs without a plan say they would consider offering a
401(k) if tax benefits existed and a quarter (27 percent) would reconsider if
plan costs were lower.
"Meaningful tax benefits and low-cost all-ETF
401(k)s that keep investment expenses under one percent are available, and can
empower more Americans to affordably build their nest egg, providing them
options on how they want to spend their retirement years," said Robertson.
"Here at Spark 401k, we're committed to partnering with more small businesses
so they can gain peace of mind and take control of their financial future."
The Spark 401k Survey was
conducted by Wakefield Research (www.wakefieldresearch.com) among 500 U.S.
business owners at companies with 1-50 employees between May 5th and 18th, 2017, using an email
invitation and an online survey. Results of any sample are subject to sampling
variation. The magnitude of the variation is measurable and is affected by the
number of interviews and the level of the percentages expressing the results.
For the interviews conducted in this particular study, the chances are 95 in
100 that a survey result does not vary, plus or minus, by more than 4.4
percentage points from the result that would be obtained if interviews had been
conducted with all persons in the universe represented by the sample.
Spark 401k provides streamlined, cost-efficient 401(k)
retirement plans for tailored for small businesses. Spark 401k offers a suite
of easy-to- access services that make it simple for employers and employees to
open and manage their retirement plans online at www.spark401k.com.
Spark 401k plans provide low-cost investments and model portfolios that
simplify investment selection to help them get on track with their retirement
goals. Plan sponsors can take advantage of customer success managers and
customer care agents to receive assistance in choosing and managing their
About Capital One
One Advisors, LLC ("COA") is a Washington Limited Liability Company that is
registered as an investment adviser with the SEC. We provide affordable 401(k)
investment advisory and ERISA 3(38) services to businesses and offer investment
advisory services to retail clients.
products are offered by Capital One Investing, LLC, a registered broker-dealer
and Member SIPC. Investment advisory services are
provided by Capital One Advisors, LLC, an SEC-registered investment advisor.
Insurance products are offered through Capital One Agency, LLC. All are
subsidiaries of Capital One Financial Corporation.