Retirement Planning

Why Your Small Business Needs a Retirement Plan

By Liane Rosenberg and Cindy Starke, Portfolio Managers, Value Line Funds

"Why Your Small Business Needs a Retirement Plan"Entrepreneurial women generate a significant impact on the U.S. economy by creating jobs and providing opportunities to many people. According to American Express OPEN, which administers a forum to share insights and connect business owners, 9.1 million women-owned businesses in the U.S. generated $1.4 trillion in sales and employed nearly 8 million people.

However, given the small size of many of these businesses, the likelihood is high that they lack a retirement plan. Bureau of Labor Statistics indicate that less than half of companies with fewer than 50 employees, either men- or women-owned, provide retirement plan options as of March 2015. Yet, there’s high demand for retirement resources, as a survey by Schwab Retirement Plan Services found that 87% of respondents indicated a 401(k) was a “must have” benefit.

With the numerous details involved in running a business, and while women grow their businesses and add employees, the thought of starting a retirement plan can be overwhelming. Here are three of the most common challenges and their potential solutions:

I Can’t Afford to Offer a Retirement Plan

While there are costs associated with starting and administering a retirement plan, many owners are able to find providers that offer basic plans that charge approximately $1,000 to $1,500 a year.

For companies that have fewer than 100 employees, the federal government offers a tax break when starting a retirement plan. Generally, a business can receive tax credits amounting to 50% of the first $1000 of the qualified startup costs, including expenses to set up and administer the plan and educate employees about it.

I Can’t Afford an Employer Match

If you choose a traditional 401(k) plan, the employer match is optional. If you can afford to match, all contributions to employees’ plans are tax deductible. In addition, you could also look at implementing a match program where the match is anticipated but not guaranteed, dependent on the annual growth of the company.

My Employees Aren’t Interested in a Retirement Plan

The Bureau of Labor Statistics indicates that roughly 70% of employees at small companies (less than 100 employees) who have access to a retirement take advantage of that benefit. However, even if few employees choose to participate, offering a retirement plan allows you, as the employer, to take advantage of the plan as well. This helps you with your retirement planning. Some small business owners may think the sale of their business will provide their entire retirement income, but may be in for a rude awakening if that plan falls through. Rather, diversify your retirement investments by participating in a plan to ensure that all your eggs aren’t in one basket.

So, How Do you Choose the Best Plan?

There are several retirement plan options including a 401(k), SEP, SIMPLE, IRA, Keogh and profit sharing plans. Each plan has its own advantages and disadvantages, so it is helpful to consult with a professional for guidance.

The plan you choose should be based on what you are trying to accomplish. Ask yourself:

  1. Is the plan meant to be an attractive benefit in the overall compensation plan offered to employees?
  2. Is the plan offered as an alternative to a higher salary?
  3. Is the plan mostly to provide a retirement vehicle for yourself with tax benefits to the business?

If you are a small business owner, consider the long-term benefits that a retirement plan offers for yourself and your employees, especially as many workers these days discover that they are not saving enough to fund retirement. Based on the 2015 Transamerica Retirement Survey of workers aged 20 through 60+, participants indicated that they understand the consequences of being unprepared. Half of those surveyed plan to continue to work at least part-time in retirement and 13% anticipate that their main source of income in retirement will come from working.

Depending on employees’ stage of life, the value of benefits varies. With small children, employees might highly value flexible work schedules, including the ability to take leave for a sick child. Older employees might value additional vacation time. Regardless of their age, all employees would receive tremendous value from putting away part of their earnings toward their future.

About Liane Rosenberg Liane Rosenberg has been a fixed income portfolio manager at Value Line Funds since 2009 and has more than 20 years of experience in fixed income portfolio management. Ms. Rosenberg received an MBA at the Fordham University School of Business, and a BA, with a degree in English and Journalism, from the State University of New York at Albany. For more information about Ms. Rosenberg and Value Line Funds, please visit

About Cindy Starke Cindy Starke has been a portfolio manager at Value Line Funds since 2014 and has nearly 20 years of mid and large cap growth investment experience. Ms. Starke received a BS in Business Administration from Fordham University and an MBA, with a concentration in Finance, from Fordham University. For more information about Ms. Starke and Value Line Funds, please visit

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