Broker Check

Everyone Deserves a Retirement Plan

May 01, 2024

It is a widely accepted fact that almost half of all American workers are not covered by a company sponsored retirement plan.  It is also a widely accepted fact that almost half of all American workers in the private sector are employed by small businesses.  This equates to about 57 million people according to a July  2022 AARP report.  (source AARP Press Room: Financial Security & Retirement , July 13, 2022 https://press.aarp.org)

 

 I feel that may be more than just a  coincidence.

 

I have worked adjacent to corporate America retirement plans my entire career.  I have seen more 401(k)’s than I can count, each one a little different yet each one basically the same.  They are a glidepath for someone to save money for their future in a helpful “out of sight, out of mind” kind of way.   I have seen fortunes made by everyday workers in Fortune 500 companies, hiring me when the golden year of retirement finally arrives. 

 

But this isn’t everyone’s story.

 

A lot of people don’t have access to payroll deduction plans that make it easy to save and invest.  It’s tough when unexpected medical bills stack up or the pressure of “you deserve it” advertising find people buying new furniture instead of funding their ROTH IRA.  This is not limited to just the underpaid in our communities,  I’ve had front row seats to this same situation in the six-figure income club, too.  Finding the motivation to save for retirement is often hard, and then having the discipline to save for it can make it harder.   So, what is the solution?

 

There is a trend sweeping the country where state laws are mandating small business owners to sponsor some type of payroll-deduction retirement plan.  And when I say small businesses, I mean very small businesses….like 5-10 employee small.  What we are looking for here is access for American workers to have the same opportunities they would have working for larger companies.  Yes, retirement plans cost money (many of you are today-years-old learning this) and the cost can be borne by the employer, the employee or the state.  The state?  Yep, states are putting their money where their regulation is and offering super ROTH IRAs for small business owners that cannot afford / do not want their own plan in place.  The employee?  Yep, some plans pass along the costs to the employee.  The employer?  Yep, some companies absorb most of the cost themselves.  I tell you this to reinforce that the excuse many small business owners make of “I can’t afford to offer a retirement plan to my employees” is no longer okay anymore.   Not with me.  And it shouldn’t be for you.

 

So what can you do if you are an employee of a small business that doesn’t offer a company sponsored retirement plan?  You can do some research and bring options like a SEP IRA, SIMPLE IRA or state sponsored ROTH IRA to your employer if they shy away from 401(k)’s. 

 

What can you do if you are the owner of a small business that doesn’t offer a company sponsored retirement plan?  You can do some research and find out how many of your employees would participate if you offered one and find a plan that fits your budget.  Even if the budget is zero.

 

I guess what I’m trying to say is that everyone may not have the discipline to save for retirement on their own, but everyone may want the opportunity to not work forever.  Times are changing.  Passive income is the new retirement!  Financial wellness is the new prescription for a balanced life!   Times are changing!  The workplace has changed, employee expectations have changed, isn’t it time small business retirement planning changed too?

 

 

Kimberly Enders CFP® CWS® CERTIFIED FINANCIAL PLANNER™

Enders Wealth Management

37800 Van Dyke Ave, Suite 125

Sterling Heights MI 48312

www.enderswm.com

#kimenderscfp

 

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Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty. Converting from a traditional retirement account to a Roth retirement account is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.