Small businesses' retirement-plan readiness splits on generational, gender lines

A new study from Capital Group highlights a generational divide among US small business owners when it comes to offering retirement plans, with millennial entrepreneurs leading the way in prioritizing employee benefits and Gen X owners lagging behind in readiness.

The “Small Business America 2025 Report,” based on a survey of 1,000 small business owners, found that 71% of respondents are optimistic about their business outlook.

Millennials, with a median age of 37, are the most likely to view retirement plans as essential, with 77% holding that view. The youngest group, Gen Z owners (median age 21), are less likely to see employer-sponsored plans as important, at 67%.

Along those lines, Millennial business owners were most likely to say they're ready to offer a retirement plan (66%), followed closely by Gen Z (63%). Gen X owners (median age 53) are the least ready to offer a retirement plan, with only 57% saying they are ready now despite having spent more time in the workforce and being closer to retirement age.

A gender gap also emerged in the findings. Among business owners not currently offering a retirement plan, 64% of men and 51% of women said their business isn’t ready to start one, suggesting men are more hesitant. Women also showed greater interest in learning about SECURE 2.0 Act benefits and were more likely to consider starting a plan based on available tax credits.

Cost, business size, and administrative complexity remain the top barriers. Thirty-six percent of owners cited expense as the main obstacle, while 34% said their business was too small and 32% pointed to limited administrative resources.

Despite these hurdles, the report suggests that offering a retirement plan may help ease broader business concerns. Owners who provide plans reported fewer worries about inflation (50%, versus 54% of non-plan sponsors), labor costs (36% vs. 49%), and employee retention (34% vs. 45%) compared with those who do not.

Renee Grimm, senior vice president for retirement plans at Capital Group, said the findings underscore the importance of education and support for business owners.

“For the thousands of small businesses who make up such a large proportion of US companies, offering a retirement plan doesn’t have to be a ‘someday’ item,” Grimm said, adding that with the right advice, “business owners can discover how the benefits outweigh the perceived obstacles.”

The study also found that financial professionals remain a trusted but underutilized resource. While 61% of owners not currently offering a plan said they would turn to a financial advisor for guidance, nearly one-third reported not having an advisor at all. Those who do offer a plan are more likely to use a financial professional, at 62% compared with 36% among those who do not.

When it comes to learning about retirement plans, 50% of small business owners said they trust financial advisors or financial planners for information. Forty-two percent said they take the word of accountants and CPAs, while just 36% said they'd turn to an experienced business owner.

Read more: Micro 401(k) boom places advisors at the center of retirement plan growth

Owners who have implemented retirement plans cited better employee retention (63%), stronger morale (56%), and greater productivity (46%) as key benefits. Eighty-one percent said they are glad they made the decision to offer a plan.

“We can make a meaningful impact in providing access to retirement for more people if we can help educate owners on the benefits for themselves and their employees of saving for retirement,” Grimm said.