Small businesses may be much closer to preparing their employees for retirement than initially expected, as contribution and savings rates top previous expectations.

The use of retirement plans has been a boon for many smaller employers, not just for the financial and tax advantages, but also for its ability to increase employee morale and retention.

Average contribution rates for small business retirement accounts have continued to climb since the recession – with an 18% increase since last year and 88% over the past six years, according to a Fidelity Investments analysis of more than 200,000 401(k)-type and individual retirement account plan options under its administration.

The same bodes for average balances, which hit $137,000 for self-employed 401(k) plans, demonstrating their successful use among small businesses. Other options such as Fidelity’s simplified employee pension plan hit over $84,000, as well as an average balance of $36,000 for Fidelity’s savings incentive match plan for employees

“[Small business owners] are starting to realize they [too] can put some money away for their own retirement,” says Brian Hogan, director of small business retirement products for Fidelity. “They’ve come to the realization that they can’t necessarily rely on the sale of their business or the disposition of it for their retirement and they probably need to do something outside of that.”

America’s gradually improving fiscal health is also pushing more employers to take action, whether it’s offering defined contribution or IRA plans.

“The more the market continues to do better and the economy continues to increase, [small businesses] start to think about their own situations and then they start to look at and say, ‘oh what can I do, how can I improve my own situation,’ and that’s what is driving some of these rates.”

Hogan says that blue-collar businesses such as your neighborhood electrician or plumber are also becoming more attuned to their financial needs. 

As for the fresh faces millennial faces coming into the workforce, job expectations differ when it comes to retirement benefits. They are aware that they have do more for themselves because there isn’t a golden parachute awaiting them when they leave the workforce, explains Eric Henon, executive director of the Retirement Advisor Council.  

“A major factor is a generational shift, if you think about millennials entering the workforce right now. They enter the workforce with absolutely no expectations of having a defined benefit plan,” says Henon. “I think for most millenials there is an innate knowledge that you have to save at least 10% of compensation towards retirement. I think the bigger number of people who know that the earlier you start the better, versus 10 to 15 years ago.”

Also See: Retirement advisers help plan sponsors get fiduciary job done: study

Julie Stich, director of research with the International Foundation of Employee Benefit Plans, agrees that the younger generation is taking on their responsibilities head on, but adds that financial literacy education is also helping. Of the 400 member organizations surveyed in IFEB’s Financial Education for Today’s Workforce study, employers with 1-99 workers reported the highest percentages.

“I think the average person is becoming more and more in-tune to this – the most recent recession impacted all of us [and] made it us all take a bigger look at our monetary situations,” Stich says.

Also See: Automatic enrollment, escalation features feed 401(k) success

In lieu of the added savings, many small employers can receive assistance from retirement advisers and administrators able to assist with plan design, which can make the process less burdensome.

“Especially among small business owners, the level of knowledge about 401(k) plans and benefits in general is pretty limited, because you are talking about people, who for the most part [just] have a technical knowledge in a particular field,” Henon explains to EBN. “And so the role of adviser is pretty critical in that small employer market.”

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