A wooden sign with the word "retirement" written on it.

Are Employees Prepared For Retirement? by Kenison Fatal

When it comes to retirement plans, many of us don’t do a good job of saving for one. In fact, about 74% of American workers fail when it comes to saving money for retirement. Business owners aren’t exempt either as many as one-third of them don’t have retirement plans either. What’s more, the Social Security Administration predicts that by 2033, social security benefits will shrink by over 20%. This will affect many retirees whose total income will depend mostly on social security. While poor saving habits can be to blame, many people just can’t afford to save as much. Plus, not all jobs offer savings plans to their workers leaving many financially unsecured. For many small business workers today, though, that is slowly changing.

As of now, new state laws have made it a requirement for more businesses to provide retirement plans for workers. This comes in response to the retirement crisis facing millions who will soon find themselves being more dependent on social security. Given its potential impact on the economy, Congress has taken more steps to address this issue. Out of all the well-known savings plan out there, 401(k)s have recently grown very popular amongst employers. The reason for this includes the fact that pension plans have become too expensive for some employers to provide. Despite this, many small businesses still don’t offer these plans for many reasons. 

One of those reasons includes the belief that 401(k) plans are too expensive for small business owners to afford. This belief isn’t completely false as small businesses typically pay more for these benefits than larger companies. At least it was in the past. Business owners today, however, can choose affordable plans from retirement solution providers such as Decisely and Human Interests. These providers offer small businesses with unique plans typically offered by corporations to meet the financial needs of their workers. Among the services offered by these providers include the development of 401(k) policies which are notoriously difficult to create. Providers such as PeopleKeep can also help businesses create IRA plans when 401(k) plans are not yet viable for employers. Tax deductions also exist for businesses that provide these types of benefits for their workers.

Other reasons include a lack of competitive match contributions being offered. Some employers don’t offer match contributions in fear of low employee participation. The truth is that matching programs are entirely optional and owners can still offer something even if it’s under 100%. Tax deductions can also be made from any contributions made in matching programs. When it comes to employee participation, some workers are not aware unaware of the benefits of these plans. This along with expensive account fees can make 401(k) plans an unpopular investment choice for some. A study, however, suggests that this can be fixed by having workers apply under work-based plans.

The new laws came into effect after a recent executive order signed by President Donald Trump. The order called for an expansion in retirement saving options which would encourage businesses to apply for multiple employer plans. Through these plans, employers could take advantage of their combined buying power to reduce their overall costs. Under Trump, the Department of Labor and the Department of Treasury have made efforts to make enrollment easier for employers.”Small businesses will no longer be at a competitive disadvantage, and small-business workers will now have many more choices,” said Trump. Amendment changes have also been made to protect the coverage of all employers by repealing the “one bad apple” rule. This means that employers won’t lose their MEP benefits even if one employer doesn’t follow the rules.

Retirement plans can provide workers with other benefits other than financial security too. While some employers might view them as an unnecessary expense, retirement plans can help employers in a number of ways as well. Providing retirement plans can help employers attract and retain quality employees which gives companies an edge over competing businesses. Offering these plans also shows how much you value your employees which would encourage them to stay within your company. This can improve employee satisfaction and reduce turnover rates. As said earlier, contributions into retirement plans like 401(k)s are tax-deductible and the money saved in them is kept tax-free. Other benefits include tax credits for new businesses and an increase in tax deductions for top 401(k) plans. 

While more organizations work to provide retirement benefits for workers, saving for retirement still remains a big issue. Many people still believe that social security will provide them with what they need when they can no longer work. Keep in mind that social security is not a retirement plan but a supplemental source of income. Not saving up for retirement has forced many people to work jobs that may be too physically demanding for them to do. Fortunately, there are many tools and resources people can use today to avoid such a fate. When it comes to having a cushy retirement, the sooner you plan for it the more well off you’ll be. 

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