3 Reasons Small Business Owners Should Have a Retirement Plan



According to a Pew Charitable Trust survey, only 53% of small to mid-size businesses, those with between five and 250 employees, offer a retirement plan. Many small businesses cite administrative hassles, plan-related expenses, and lack of employee interest as reasons for not offering a retirement plan. As a small business owner, you may be asking yourself, why should I have a retirement plan?

Below are the top three reasons, as a small businesses owner, you should have a retirement plan:

  1. Saving for the Owner’s Retirement: The top reason a small business owner should have a retirement plan is to save for their own retirement. Yes, you can sell the business to fund your retirement, but finding potential buyers can be a challenge. There is no guarantee that you will net enough to meet your retirement income needs after the sale. Saving for this goal during your career will put you in a better negotiating position when you do decide to retire and sell the business.
  2. Tax Advantages: Employer contributions to retirement plans are tax-deductible and can potentially reduce the business’s tax liability. Depending on the type of plan a small business implements, the tax deduction can be significant. The key thing to consider is the amount of money you can save in the plan. As my dad would say, “No reason to kill a fly with a sledgehammer.” Likewise, no reason for a small business owner to implement a defined benefit plan when an IRA will do. A more complex plan could potentially generate a bigger tax deduction and allow you to save more towards retirement. In the end, you still must be able to fund it.
  3. Employee Retention: The final reason a small business owner should have a retirement plan is employee retention. This reason seems to matter more depending on what stage the economy is currently in and the type of folks you employ. If the economy is strong and unemployment is low, new hires will likely demand richer benefits, including a retirement plan. White-collar employees will typically expect some sort of retirement plan to be offered in any potential employment opportunity.

While a little over half of small business owners have made the decision to offer a retirement plan, it is a good idea that more follow their lead. At Marzano Capital Group, we have helped many small business owners decide what type of plan is best suited to their needs. Give us a call today to discuss your options!

(general disclaimer to remain above advisor’s picture, as done in previous articles)


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