Are Small Business Owners Ready for Retirement?

While small business owners (SBOs) acknowledge the importance of preparing for retirement, a new survey discusses how they find out about retirement.

And while setting money aside into savings or investments was cited as a primary source by just over three-fourths SBO respondents, only 45% cited setting aside money into a company retirement plan, according to the Guardian Small Business Owners Retirement Readiness Study.  

Sources for Retirement Success

According to the report, the primary sources for retirement success cited by small business owners were:

• 77% — setting aside money into savings or investments
• 54% — investment in real estate
• 48% — speaking with a financial advisor
• 47% — reading books or articles about retirement
• 45% — setting aside money into company retirement plan
• 39% — setting aside money in whole/permanent life insurance plan

Small business owners in 2014 place a greater emphasis on building a legacy than they did in 2011. However, there is a group of SBOs that does not have a comprehensive financial plan for retirement, largely because they do not see the value in it. In fact, according to the report, some plan to sell their business to create assets for retirement, so they do not see the point in producing a succession plan.

Those who have retirement plans and succession plans in place share several characteristics, including:

• They seem to have more of a sense of urgency about planning the future of their business and their life.
• They are financially more successful than those who do not have plans.
• They are more likely to have a larger business.
• They are more likely to have higher revenues.
• They feel they are able to retire earlier than expected.
• They expect their business to grow, and feel more financially secure

Ready for Retirement?

Just over half (52%) of SBOs report they are “very/fairly well” prepared for retirement, a comfortable majority of SBOs are not planning to retire at all, and will do at least some work for pay during their golden years. 

Of those who do not plan to retire, more than half say they will find it difficult to completely retire and over one-third say they don’t really want to retire.

Asked what they need to help them prepare for retirement, the most common response was “financial planning/investment advice,” including information on next steps to take, what their options are, understanding how much they’ll need for retirement, help in establishing a plan, understanding tax implications, and acquiring advice on making their savings grow.

Compared with 2011, more SBOs are starting businesses by themselves rather than with a partner. However, despite fewer partnerships, nearly two-fifths of SBOs believe that running their own business gives them more time to spend with their family.