When running a business, you as an owner (or part of an ownership group) are never short on responsibilities. First and foremost, you are tasked with running your company and running that company well! You must manage expenses, understand the marketplace and your competition, market to new customers and keep current ones happy, not to mention manage your employee base. With countless responsibilities that business owners must contend with, who has time to worry about what retirement plan is right for themselves and their employees?
Several our current clients fall into the “business owner with only so many hours in the day” category. Let’s face it, we are all busy people right!? It has been my experience in working with a number of entrepreneurs over the years who start and run successful businesses that they often feel like the appropriate exit strategy is to sell the business in the future to create a windfall for their retirement. Because of the potential of a sale, business owners may not worry about saving now.
This may certainly come to fruition and a lot of times it does. Although in certain cases, business owners are less fortunate in that they can’t sell their business when they want to or need to. Some plan to pass their business to the next generation which can certainly work (I have seen it first-hand) but passing a business beyond the second generation may become difficult for various reasons. Recent statistics indicate that approximately 66% of all small-business owners offer no retirement plan as a way to help themselves and their employees save and prepare for the future. To me, that is a staggering statistic given the role that small businesses play in the health of the US economy.
Reasons for the overall shortage of small business retirement plans may be any or a combination of the following:
- Business owners don’t have the time to research the range of plans in the marketplace.Given the very viable reasons mentioned above, this could certainly be the case for business owners.
- Perhaps they don’t think they have enough employees for it to matter. If you have a few employees or a few hundred employees, there is a plan out there that will make sense. Let me assure you, retirement plans come in a variety of shapes and sizes.
- Retirement plans are too expensive to offer to employees. Many retirement plan options are more affordable than you may realize. Depending on the structure and plan design, your employees can help shoulder a portion of that cost.
- Lastly, business owners are fearful to commit to starting a company retirement plan because of an uncertain future. Perhaps that uncertainty is centered around who will take office in 2020 or even a more near-term fear of the trade talk rhetoric between the United States and China. There is no doubt everyone has something that keeps them awake at night. If you are waiting on the perfect economy, the perfect president, 0% unemployment and peace in the Middle east, you may be waiting a while!
There are numerous reasons concerning why NOT to start a retirement plan for your business, and there is certainly no perfect plan or one-size-fits-all solution. On the flip side, having a retirement plan can be incredibly helpful not only for you as a business owner to save additional retirement dollars (among other benefits), but it also can create positive morale within your company as well as increase retention of valuable employees. I recently helped an attorney friend/client with 24 employees start a retirement plan for his company. His words to me were, “why didn’t I let you do this for me sooner.”
In closing, I would strongly encourage any business owner reading this to talk with other professionals in your peer group and with your trusted advisors about this topic. Take the time to investigate your options, I feel confident you will be glad that you did.
GENCapital is a wealth management firm offering investment management, financial planning and business advisory services for individuals, families and organizations. With a concierge approach, extensive resources and generations of experience, we go beyond traditional investment strategies and partner with you to deliver a plan customized to your goals. Based in Atlanta, Georgia, our team of qualified and reliable professionals is committed to developing long-term relationships and building your wealth for generations.
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