Aspiring entrepreneurs may not take the risk of starting their own businesses because their current jobs help them save for retirement. To ensure potential entrepreneurs are not further inhibited from starting their own businesses because of worries over a lack of retirement savings, federal law should:

• Permit entrepreneurs to make “reach-back” contributions to their retirement accounts for a limited number of years, and to have the tax deferral apply to the current tax year in which those payments are made. This policy recognizes that entrepreneurs often do not have income in the early years of a new business to put toward retirement, and it gives those who are willing to take the risk of starting a business the ability to catch up on their retirement contributions and save for the future when they are more likely to have the means to do so.

Supporting Evidence

• Three-quarters of millennials who own, plan to own, or would like to own a business listed the lack of an employer-sponsored retirement plan as a barrier to entrepreneurship.
• A survey also showed that 34% of business owners lack retirement plans.