Experts disagree about whether there’s a retirement-savings “crisis” in the US as a whole. We’re not economists, so we won’t attempt to resolve the dispute. They also disagree about what should be done to boost people’s savings for retirement. We’re not policy experts, so we won’t try to untangle this one either. (We probably wouldn’t see eye to eye on the issue anyway.)
But here’s something that nobody disagrees about: plenty of families in the lower and middle segments of the income spectrum have little or no savings for retirement. Whatever you think the government should or should not do, there’s a big opportunity here for business to take the lead.
A generous retirement program is a highly valued benefit that will help you attract and keep good people—a competitive advantage. It will also make a big difference in the lives of your employees. If your contributions to the program are partly linked to company performance, you will further engage your employees in driving results.
What can companies do? Offer a 401(k) plan, sure. If your business can afford to match employee contributions, terrific. And if you auto-enroll people (with an opt-out option) you’ll get much higher participation.
Beyond that, it’s worth considering an employee stock ownership plan, or ESOP. Selling part—or eventually all—of your company to the employees through an ESOP is likely to strengthen the business. Sellers can stay on to run the company, if they want to, or they can retire. In either case they may be eligible for deferral on their capital gains taxes.
The main thing an ESOP does is let employees build up a nice nest egg for their own retirement. According to data from the well-respected National Center for Employee Ownership (NCEO), employee owners on average have 2.5 times as much in their retirement accounts as other workers. We know of many blue-collar employee owners who have built up hundreds of thousands of dollars in their accounts over time.