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Jim Lentini: This economy and your 401(k)

Posted: September 9, 2009 10:08 p.m.
Updated: September 10, 2009 4:55 a.m.
 
With the current economic problems affecting all of us, small businesses are still struggling to recover in the wake of last year's collapse of the financial markets and they face a challenging road ahead.

Forty-four percent of small businesses are concerned about whether they can continue matching employee's 401(k) contributions, according to a survey by Nationwide Financial Services.

Survey participants included CFOs, small-business owners, HR representatives and others.

Small businesses were defined as those with five to 250 employees.

According to my research, businesses with less than 500 employees are responsible for 80 percent of the GDP (gross domestic product) in the United States.

Those who identified themselves as "small-business owners" are especially concerned.

Fifty-one percent may have to reduce 401(k) contributions or stop matching them and 53 percent are worried about having to change their healthcare benefits.

However, three in four small businesses don't expect the economy to affect their ability to continue offering a 401(k) plan altogether.

Though small businesses are facing some tough choices, they clearly understand the importance of offering a pension plan, and 64 percent offer a retirement plan.

One of the top reasons learned from the survey was that business owners believe offering a retirement plan is important to help employees invest for retirement, and for attracting and retaining good talent.

Seventy-seven percent of small businesses work with an investment professional to help achieve their goals.

Seventy-five percent said the quality they value most in an investment professional is the ability to understand the company's needs.

Seventy-four percent value the advisor's ability to help them meet the legal responsibilities that come with offering a retirement plan.

If you are thinking about reducing or eliminating your employer match because of these troubling times, be sure you have exhausted all other options first.

These are special times and you should discuss issues and options with your financial advisor.

Your advisor can help evaluate the problems your business is having and offer solutions and options for both the employer and the employee.

Jim Lentini is president of Lentini Insurance & Investments Inc. He can be reached at (661) 254-7633. His column reflects his own views and not necessarily those of The Signal.

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