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Do Your Retirement Preparations Match Your Aspirations?

By Adrienne Burke | Small Business

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Most small business owners expect to continue to work, in some capacity, well beyond retirement age, but many also expect the fruits of their hard work to fund their golden years: Thirty-five percent of business owners are counting on the sale of their business to be financially prepared for those days.

And yet, according to The Small Business Owners Retirement Readiness Study, released recently by the Guardian Life Insurance Company of America, only 17 percent of small business owners have identified a potential buyer of their company. The rest, as yet, have no exit strategy.

Guardian concludes, based on its survey of nearly 1,500 business owners aged 27–74, that there’s a disconnect between business owners’ aspirations and preparations.

“It is extremely important for small business owners to understand all aspects of their retirement plan to ensure they stay on track for a financially secure retirement,” says Douglas Dubitsky, Vice President, Guardian Retirement Solutions. “Many small business owners are counting on the sale of their business to fund their retirement, but this expectation comes with a great deal of risk.” 

For those who aren’t planning to sell their business, succession planning is key. Nearly two-thirds of SBOs either have a succession plan or are working on one. In contrast with their peers who aren’t in a hurry to develop a retirement or succession plan, those who have them in place share many characteristics and attitudes:

  • A sense of urgency about planning the future of their business and their life
  • Belief they will be able to retire earlier than expected
  • More likely to have higher revenues
  • More likely to have a larger business
  • Expect their business to grow
  • Feel more financially secure
  • Are financially more successful than those who do not have plans

In all, small business owners expect to rely on six primary sources for retirement success:

  1. Savings or investments: 77%
  2. Real estate investments: 54%
  3. Financial advisor: 48%
  4. Reading books or articles about retirement: 47%
  5. Company retirement plan: 45%
  6. Whole/permanent life insurance plan: 39% 

The study also showed that more women owners (56%) than men (45%) acknowledge that they are not confident or financially prepared for retirement. “Women … can do more to prepare for retirement and feel as confident as their male counterparts,” Dubitsky says.

“A retirement savings plan is an essential tool for any small business owner’s financial security,” he says. “Yet, it needs to be put into motion many years before retirement.” As a financial professional who educates and guides people on optimizing their retirement plans, Dubitsky, of course, recommends that business owners turn to a team like his.

The following infographic comes from The Guardian Small Business Owners Retirement Readiness Study.

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