Offering a 401(k) is not only beneficial to employees, but also to owners. Right now, about half of small business owners — 47 percent — are saving less than 10 percent of their income for retirement. And even more startling, 25 percent are not saving anything at all.
In lieu of an established 401(k) plan, more than one-third of small business owners are relying on the sale of their business to fund their retirement. This increases to more than half among those with revenue of a half million or more. Selling your business to fund retirement runs the risk of being financially underprepared at a point where there isn't much time to invest in your savings.
While the sale of a business can certainly provide a cushion to your retirement savings (assuming you get the asking price you need), it can be a risky strategy to serve as your sole retirement plan. Small-business owners can better prepare for retirement by establishing a 401(k) plan and continuing to contribute to it throughout their career.
At the end of the day, the decision to offer retirement benefits for employees is a choice for small-business owners. By educating yourself and understanding the myths and misconceptions, you can position yourself to make an informed decision that helps you be retirement-ready, able to better manage taxes and is good for your employees and your company's bottom line.
— By Stuart Robertson, president of Capital One Advisors Spark 401k