The California state government has stepped in to mandate that small business owners have to start offering a retirement plan to their employees in an effort to close to coverage gap, whether they want to or not. Enter, CalSavers.
Profit sharing seems to become more and more buzzworthy around this time every year—after the fiscal year has concluded but before businesses are required to file their corporate taxes. But profit sharing plans are subject to legal regulations, so before deciding whether to offer profit sharing this year, small business owners will want to make sure they are familiar with the ins and outs of 401(k) profit sharing.
We’ve been saying it for years—in order to advance American workers’ retirement security in a major, tangible manner, the government probably needs to intervene in one way or another. The conversation began years ago with state-mandated auto IRAs and recently turned to Multiple Employer Plans (MEPs) and Required Minimum Distribution (RMD) regulations when President Donald Trump signed a new executive order aimed at enhancing retirement security in America.
Small business owners often enjoy perks that their corporate counterparts may not always have the chance to experience; a strong sense of community, a family-like atmosphere, and the ability to make each employee feel as though their voice is truly heard are all experiences that can be unique to the small business culture. But many small businesses fall behind when it comes to the benefits that are offered, especially when looking at retirement savings. And that alone can be a serious issue.
The results from recent studies surrounding retirement readiness are in, and they don’t look good. The National Foundation for Credit Counseling reports that while retiring without having enough money set aside is the most worrisome area of personal finance for American workers, 27 percent of U.S. adults do not save any portion of their household’s annual income for retirement. Taking a cue from this statistic, and understanding that everyone benefits from making savings a priority, these states are proactively investing in the economic futures of their citizenry by introducing laws that provide state-run retirement savings initiatives.
There’s been a lot of talk recently about how many American workers lack access to an employer-sponsored retirement plan, and the statistics are alarming. According to a recent study conducted by the Indexed Annuity Leadership Council, one out of every eight American employees are not offered any type of retirement plan from their employer. It gets even worse when the conversation turns small-business-specific. According to the Employee Benefits Research Institute, only about three in ten small businesses have retirement savings plans available to employees. The problem here is obvious, so the government is stepping in.
Social Security, which was designed to only replace a portion of workers’ pre-retirement earnings, provides most of the retirement income for an alarmingly high amount of households aged 65 and older in the United States – about half. Potentially even more distressing is that more than a third of American’s don’t have anything saved for retirement, and something needs to be done about it.
One question on most people’s minds these days (or at least it should be) is whether or not they will have enough money saved for their retirement. The next question naturally becomes, “How can I be retirement-ready when the time comes?” For those still working, access to employer-sponsored retirement savings plans can help set them on the right path. But recent statistics show that 34 percent of working adults don’t have any retirement savings. None. Zero. Zilch. Unless there’s a drastic change, this leaves millions of retiring Americans relying solely on just their Social Security income.
Determining the right type of 401(k) plan for your small business can be challenging. With so many options and so much to consider, one key decision you may have to make is whether to go with a traditional plan design or a safe harbor plan design. This is a vitally important decision, as your choice can have long-term implications for both your employees and your company.
You’re a small business owner and things have been going well lately. Customers are happy and you’re feeling proud of your accomplishments. You realize the timing is right; it’s time to look into retirement savings plans for you, your staff, and future employees. The problem is words like “fiduciary” and “investment portfolio” intimidate you. You have a lot of questions – starting with where to begin. Often times talking to a financial advisor at the beginning of your decision-making process can ease the stress and get you pointed in the right direction, so, follow these seven tips to help you get the advice you need when you meet your new advisor for the first time!
Endless opportunities for relaxation. Time to take up new hobbies. Feeling financially free with wide-open days. However you personally envision spending the autumn of your life, one of the cornerstones of the American dream is a secure retirement. After a long and dedicated career, people envision their golden years stretched out ahead of them, filled with leisure and a chance to enjoy what they worked hard for all their lives. That dream has become more difficult to reach over the past decades, but with a little bit of employer-sponsored help, it’s still possible to restore retirement to America.