Small Business Labs

Micro-Businesses and Retirement

The National Association for the Self Employed released a survey in May (OK I'm a bit late on this) showing that the majority of micro-businesses (defined by NASE as 10 or fewer employees) owners and employees are unprepared for retirement.  From the press release:

"a large majority of owners and employees of America's micro-businesses do not have access to retirement plans and are financially unprepared for retirement. More than 3,000 owners of companies with 10 or fewer employees participated in the survey."

The survey shows that 80% of all micro-businesses surveyed do not offer any kind of retirement plan and that the primary barrier - listed by 62% of the respondents - is the cost of administering and contributing to a retirement plan.

What is really interesting to me is despite the huge amount of financial institution marketing money spent trying to attract small business retirement accounts, 40% of the respondents are not familiar with and/or understand the retirement plan options available.

While the cost of contributing to retirement is clearly an issue for many, plan adminstration should not be a barrier.  My micro-business retirement plan (covering myself and my partner) takes about 2 hours a year to administer.  This appears to be an education problem to me.  I guess the financial industry needs to spend even more money marketing small business retirement plans. 

Related to this, Anita Campbell at Small Business Trends lists retirement as one of the three things keeping entrepreneurs awake at night. 

Gallup on "This Is Not Your Father's Retirement"

Gallup recently released a set of survey results on retirement.  Key quote from the report:

According to Gallup's annual Personal Finance poll, conducted April 2-5, 2007, nearly three-quarters of nonretired Americans say they plan to rely on income from part-time work after they "retire," to help fund their golden years. This includes 21% who say part-time work will be a major income source for them, and another 52% who say it will be a minor source.

This is quite a shift from current retirees, with 78% of current retirees reporting that part or full time work is not a source of retirement income.  This survey echos the research we've done, especially on boomers and retirement.  Boomers both want and think they need to continue working in retirement.  They want to work to stay involved, be active, and continue to contribute to society.  At the same time, many boomers think they will need to work to afford a comfortable retirement.

In terms of small business, later retirement ages and boomers working in retirement will have several impacts.  First, since small business creates most of the new jobs in the US most of the jobs available to retirees will be small business jobs.  Second, we think an increasing number of older Americans will start part-time and personal businesses (sole proprieterships or businesses with no employees beyond the owner).  They will do this for both emotional and financial reasons - an greatly increase the small business formation rate for older Americans.