A range of forces buffeting the U.S. economy — from rising health care costs to a loss of full-time jobs and a decline real wages — help to explain the lack of retirement preparedness in the U.S.
One other factor gets, perhaps, too little attention: the lack of retirement benefits offered by small companies to their workers.
For evidence as to the size of the problem, look no further than at a new report from ADP Research Institute. The study, “Retirement Savings Trends: How employers can extend coverage and simplify the retirement readiness process,” reveals that just one-third of small businesses with 20 or fewer employees offer retirement benefits. That compares to nearly 98 percent of companies employing 5,000 or more workers.
Now in its second iteration, the study examines companies (by size and type of industry) that offer retirement benefits. The research details retirement savings behaviors of approximately 10 million U.S. employees between the ages of 20 and 69 with total annual compensation of $20,000-plus from about 161,000 organizations.
The lack of retirement savings at small businesses with 20 or fewer employees is compounded by the low participation rate at companies that do offer retirement benefits. Only 48.2 percent of employees at these businesses join an employer-sponsored retirement savings plan. Contrast this with businesses that have 20-49 employees (75 percent) or 50-499 employees (93.7 percent).