Small Business Retirement Benefits ---Less Than You Might Think
Reuters and Inc.com report that only 14% of small businesses offer 401(k)'s to their employees, and 63% do not offer any retirement benefit of any kind.
"The survey found that owners who do not provide retirement benefits fail to do so for a variety of reasons. Fifty-four percent said they didn't have enough employees to make it worthwhile, 28 percent cited a financial inability to match contributions, and 26 percent blamed unstable business circumstances."
This also raises the important question of what small business owners are doing to fund their own retirements.
It's not all that surprising that 401(k)'s are not used more widely by small business. They're relatively expensive and complicated to administer. And they usually lock you into matching contributions that you don't control: the amount that the employer must pay in matching contributions depends on how much the employees contribute. That can strain the finances of a smaller company with limited cash flow.
On the other hand, there are other options, such as SEP-IRA's, that give the employer more control. The employer makes 100% of the contributions, but only when and in amounts that it chooses. If the money is not available, there's no obligation to contribute at all.
Good information on retirement plan alternatives for small employers is available from brokerage firms and mutual fund companies, such as Schwab and Vanguard.