Big Retirement Savings Gains for Small Businesses: Fidelity® Analysis Reveals Retirement Contributions on the Rise

Average Contributions Increase 18% in one year, Average Balances Up 88% since Height of Financial Crisis

Business Wire

BOSTON--(BUSINESS WIRE)--

As another sign of growing economic health for small businesses, Fidelity Investments® latest Small Business Retirement Savings Analysis reveals increases in average balances and contributions for the third consecutive year. According to the analysis1 , 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), in the past year alone, the average balance in these plans increased 4 percent—and average contributions increased 18 percent. Better still, compared to 2008 levels, when balances were at their lowest, average savings have jumped an impressive 88 percent, a positive indication that suggests the small business segment is feeling confident enough about their present financial situation to contemplate saving for a future in retirement.

Since small business owner attitudes are often good predictors of economic growth, these retirement savings numbers are good news, and in line with other indicators. For example, according to the National Small Business Association’s 2014 year-end economic report, nearly half (48 percent) of respondents feel the economy is better off now than it was five years ago, the highest level since the question was first asked in 2008. 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 (which are offered to business owners) and SIMPLE IRAs (offered to employees) 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 of the savings behaviors of small business accounts from the beginning of 2008 to the end of 2013:

  • Contributions Continue to Grow: The average contribution to these retirement savings accounts has increased across the board since 2008, with those using Self-Employed 401(k)s experiencing the largest increase of 21 percent to $21,661. Employer contributions to SEP-IRAs increased 17 percent from 2008, reaching $13,814 at the end of 2013. Average contributions to SIMPLE-IRAs increased the least, rising 7 percent to $6,162.
  • Average Balances Are on the Rise: As a result of the increased contributions and market rebound, average balances have enjoyed significant growth since 2008. 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—signaling 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.

To illustrate this, Fidelity has created an infographic that demonstrates average retirement contribution and balance gains for small businesses.

Fidelity Helps Small Business Owners Reach Their Goals

For those looking to make even larger retirement savings gains, Fidelity has retirement plan resources available to help small business—owners and employees alike—achieve their goals. For small business employers, Fidelity has a Viewpoints article on selecting the best plan for a small business that outlines the types of plans available to small businesses and the tax advantages of each plan, as well as a video to help determine which plan is best for their specific needs. General information on saving for retirement is available at Fidelity’s Retirement Roadmap site.

Fidelity’s online Small Business Retirement Center also has a wealth of educational information available, including an SEP Contribution Calculator to help figure out what percentage should be contributed to a SEP-IRA, Self-Employed 401(k) plan or Profit Sharing plan. In addition, Fidelity has retirement representatives with technical knowledge on retirement plans for small business owners and can provide one-on-one consultation at no charge to determine which plan to select and a contribution rate.

About Fidelity Investments

Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.7 trillion, including managed assets of $2.0 trillion, as of March 31, 2014. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

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1 This analysis was based on the population 200,000 small business accounts that utilize a SEP-IRA, Self-Employed 401(k) or SIMPLE-IRA with Fidelity from 01/01/2007 through 12/31/2012. These plans are generally used by businesses with 10 or less employees and offer various tax advantages.

Contact:
Fidelity Investments
Corporate Communications, 617-563-5800
Follow us on Twitter @FidelityNews
or
Deborah Pont, 401-292-5318
Deborah.Pont@fmr.com
or
Joe Madden, 617-901-0469
Joseph.Madden@fmr.com

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