ESOPs: A Good Plan For Retirement

ESOPs are a powerful tool that allow average workers to accumulate some sizable retirement accounts.  Non-ESOP companies, on average, contribute close to 4% of wages into a 401k retirement.  Public ESOP companies contribute 6% of wages, and private companies contribute somewhere between 8%-10% into their qualified ESOP accounts (source NCEO)

Some critics say that this is putting everything in one basket and is very risky.  The good news is that many ESOP companies also offer a 401k plan.  The logic would lead one to think that employees in an ESOP company would not contribute  into another retirement plan when they are receiving significant allocations into their ESOP.  A study by the NCEO that will be published in 2010, says ESOP employees are just as likely to contribute to a 401k plan as non-ESOP employees.

Teaching and involving employees to be owners is a good plan to a happy retirement.  There are no guarantees, but there are no guarantees with a 401k stock accounts or that Social Security will continue to be available to those who retire.

Flickr photo by sweetie pie rebecca