Fidelity® Small Business Analysis Highlights Rebound In Retirement Plan Balances And Contributions Despite The Economic Downturn

Balances for Small Business Retirement Plans Increased an Average of 20 Percent Between 2007 and 2012

BOSTON – Fidelity Investments® today unveiled a six-year analysisi of more than 200,000 small business accounts that utilize a Simplified Employee Pension Plan (SEP-IRA), Self-Employed 401(k) or Savings Incentive Match Plan for Employees (SIMPLE-IRA) with Fidelity. These plans are generally used by businesses with 10 or less employees and offer various tax advantages. The findings show that average balances in these small business retirement savings plans increased 20 percent since 2007, and jumped an average of 64 percent over 2008 when balances were generally at their lowest point. The analysis also indicates small business owners and their employees continued to increase contribution rates as the economy emerged from the financial crisis five years ago.

“The recent recession had a significant impact on many small businesses and continues to pose obstacles in today’s economy, but we are encouraged to see that both owners and their employees have remained committed to saving for retirement,” said Ken Hevert, vice president, Fidelity Investments. “For many small business owners, selecting a retirement savings plan that is both easy to administer and low-cost is critical. Additionally, an appropriate plan can help maximize retirement savings, as well as to retain valuable employees and provide key tax deductions.”

In a review of the savings behaviors of small business accounts from the beginning of 2007 to the end of 2012, Fidelity examined account balances utilizing a SEP-IRA, Self-Employed 401(k) or SIMPLE-IRA savings plan. The key findings include:

• Contributions Continue to Grow: The average contribution to these retirement savings accounts increased across the board since 2007, with those using Self-Employed 401(k)s showing the largest increase of 21 percent to $20,950. Employer contributions to SEP-IRAs increased 14 percent from 2007, reaching $13,250 in at the end of 2012, while average employer/employee contributions to SIMPLE-IRAs increased the least, rising 4 percent to $6,000.
• Average Balances Rising: As a result of the increased contributions and market rebound, average balances also have grown since 2007. The average balance of Self-Employed 401(k) plans rose from $103,400 in 2007 to $119,500 in 2012—a 16 percent increase over six years—signaling a strong rebound for small business owners who are using retirement plans for savings purposes. SEP IRA and SIMPLE IRA balances also increased by 17 percent to $71,300 and 26 percent to $31,100, respectively.

Fidelity Helps Small Business Owners Reach Their Goals
Fidelity has a number of retirement plan options for small business owners, including SEP-IRA, SIMPLE-IRA and Self-Employed 401(k) Plan. For employers, especially those with 10 or fewer employees, Fidelity has published a new Viewpoints article on selecting the best plan for a small business.

This article outlines the tax advantages of each plan, including pre-tax contributions, tax-deferred growth potential and the potential to deduct employer contributions as a business expense. In addition, a tax credit may be available for start-up costs associated with a new plan. Beyond these tax advantages, each plan has distinct differences, such as whether the account is funded solely by the employer as in a SEP IRA, or whether the employee can contribute as well, as in the Self Employed 401(k) and the SIMPLE-IRA.

Fidelity’s online Small Business Retirement Center also has educational information available for small business owners. In addition, Fidelity has retirement representatives with technical knowledge on retirement plans for small business owners and can provide one-on-one consultation at no charge to determine an optimal plan and contribution rate.

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.1 trillion, including managed assets of $1.7 trillion, as of March 31, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

 i This analysis was based on the population 200,000 small business accounts that utilize a SEP-IRA, Self-Employed 401(k) or SIMPLE-IRA with Fidelity from 01/01/2007 through 12/31/2012.

Investing involves risk, including risk of loss.

Fidelity does not provide legal or tax advice and the information provided above is general in nature and should not be considered legal or tax advice. Consult with an attorney or tax professional regarding your specific legal or tax situation.

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