The Retirement Gap: Why Small Businesses Need to Act
The Stark Reality of Retirement Plans in Small Businesses
Recent data paints a concerning picture: 66% to 74% of small businesses (those with 100 or fewer employees) do not offer retirement plans to their workers. According to Fidelity Investment’s 2023 Small Business Retirement Index, only 34% of small businesses provide retirement savings options, leaving 66% without. Similarly, a 2022 ShareBuilder 401k survey found that 74% of small businesses skip offering 401(k) plans, and the U.S. Bureau of Labor Statistics (2023) notes that 43% of firms with fewer than 100 employees lack any retirement benefits. This gap leaves millions of workers without a crucial tool for financial security in their later years.
Why This Matters
The absence of employer-sponsored retirement plans has far-reaching consequences for both employees and society:
Employee Vulnerability: Without access to plans like 401(k)s, employees must rely on personal savings or Social Security, which often falls short. The average Social Security benefit in 2025 is about $1,920 per month, far from enough to cover living expenses in most areas. This leaves workers at risk of poverty or delayed retirement.
Economic Ripple Effects: Employees without retirement savings may reduce spending in retirement, slowing economic growth. Additionally, reliance on public assistance programs strains government resources.
Talent Retention Challenges: Small businesses compete for talent with larger firms that often provide robust benefits. Not offering a retirement plan can make it harder to attract and retain skilled workers, impacting productivity and growth.
Barriers to Offering Retirement Plans
Why do so many small businesses skip retirement plans? Common hurdles include:
Perceived High Costs: Many owners believe plans like 401(k)s are expensive to set up and maintain.
Administrative Burden: Small businesses often lack HR staff to manage complex plan regulations.
Lack of Demand: Some owners assume employees, especially younger ones, aren’t focused on retirement.
Solutions and Opportunities
The good news? Solutions exist to make retirement plans accessible:
Low-Cost Options: Programs like SIMPLE IRAs reduce costs and administrative work.
Tax Incentives: The IRS offers tax credits, like the SECURE Act’s credit, covering up to $5,000 of startup costs for new plans.
Employee Benefits: Offering a plan can boost morale and loyalty, giving small businesses a competitive edge.
Call to Action
Small business owners: it’s time to rethink retirement plans. The long-term benefits—employee security, business growth, and economic stability—far outweigh the initial hurdles. Explore affordable options, get a free consultation with us here, and take advantage of tax incentives. By acting now, you can close the retirement gap and build a stronger future for your employees and your business.
Sources: Fidelity Investment (2023), ShareBuilder 401k (2022), U.S. Bureau of Labor Statistics (2023)
