Wherever you stand on President Bush's proposal to revamp Social Security, you might thank him for handing you a bit of a selling opportunity. No matter what the outcome of the current debate is — even if the debate ends in political gridlock and no changes are made to Social Security — one clear message has gotten through: Most Americans have done a poor job saving for their retirements.
That's an opportunity for all reps and financial advisors; according to a recent survey by Bain & Co., over two-thirds of retiring Americans are making decisions about their retirement investments without a financial advisor. But it is an especially rich opportunity for advisors who serve small-business owners: Creating a smart retirement savings program can help a business owner plan for his own retirement, save a bit on taxes and provide a key benefit to attract and retain good employees.
Even now, there is a range of products and services that advisors can offer, from simplified employee pension IRAs and solo 401(k)s for the smallest companies to corporate 401(k) plans for hundreds of workers. And new opportunities are arising. The next big thing, of course, is the Roth 401(k), which will allow workers to put after-tax dollars into retirement accounts. As with Roth IRAs, the investment returns accumulate tax-free and withdrawals are not taxed. The final rules will be hammered out over the next few months, but Roth IRAs already look like an interesting choice for many small businesses. One of the best features for business owners is that the new Roth accounts won't have the income limits of the old Roth IRAs.
You can expect other innovations as policy makers wrestle with how to create the savings that Americans need to retire — with or without the president's private accounts in Social Security. Another proposal floating around Washington is something called a Universal 401(k), which, as the name implies, would make a 401(k) a standard benefit.
Financial advisors who take the time now to learn more about retirement plans and products — and who can help small-business owners get their plans set up — will be well positioned when more savings vehicles are created. For a taste of what's out there now, please see the story on page 10 of this supplement.