By Lisa Barron
Contributions to small business retirement plans
have increased dramatically since the Great Recession, according to Fidelity Research.
The study, which looks at more than 200,000 small business accounts offering a Simplified Employee Pension Plan (SEP-IRA), Self-Employed 401(k) or Savings Incentive Match Plan for Employees (SIMPLE-IRA), found that in the past year alone, the average balance in these plans increased four percent, and average contributions increased 18 percent.
In addition, compared to 2008 levels, when balances were at their lowest, average savings have jumped a whopping 88 percent, which suggest, Fidelity says, that the small business segment is feeling confident enough about their present financial situation to contemplate saving for a future retirement.
Fidelity’s analysis also suggests this increased optimism is shared by both employers and employees alike, with contributions to both Self-Employed 401(k) s and SIMPLE IRAs steadily increasing for five consecutive years.
“This is encouraging, because our research has consistently shown too many Americans are unprepared to live comfortably in retirement
,” said Ken Hevert, vice president, Fidelity Investments.
“While many small business owners count on the sale of their business as a big part of their retirement plan, if the recent past is any indication, it’s important to have options. Selecting a retirement savings plan that is easy to administer and low-cost is critical—it can help maximize retirement savings, retain valuable employees and provide key tax deductions.”
Among the other key findings is that average balances are on the rise. As a result of the increased contributions and market rebound, average balances have enjoyed significant growth since 2008, according to Fidelity.
The average balance of Self-Employed 401(k) plans rose from $75,275 in 2008 to $137,447 in 2013—increasing 83 percent over five years, which Fidelity says signals a strong rebound for small business owners who are using retirement plans
for savings purposes. SEP IRA and SIMPLE IRA balances also increased by 92 percent to $84,410 and 100.8 percent to $36,235, respectively.
Originally published on BenefitsPro.com