It has become a fact that most U.S small businesses owners are not prepared for retirement. According to a report from BMO Wealth Management only a small percentage of the 28 million business owners that exist today are prepared to retire with 3/4 having less than $100,000 saved for retirement and only 8% saving $500,000. Of those that have saved less than $100,000 the ones in the higher age group from mid 40’s-60’s were more prepared then younger owners. Jason Miller the national head of BMO Wealth Management said he was not shocked by the results saying “unfortunately, the results bear out what we see in practice, I don’t know that there were any surprises.”
Miller believes that one of the reasons why as to why most businesses owners aren’t focusing more on saving towards their retirement is the simple fact that in certain economic cycles many businesses have difficulties turning a profit and so much of the revenue they make is used to be reinvested in their business which sacrifices the owners savings plans for the future. To counter act this Miller has proposed that small business owners keep in mind that a plan should be put into place to accumulate wealth outside of their business’s operations which Miller believes is very important for those nearing retirement age. He says “And for those nearing an exit, they should be putting together a thoughtful succession and considering the post-sale effect. They should consider the personal implications for the remainder of their retirement.”
Another important piece of advice Miller believes business owners must use for retirement planning is preparation pre-planning saying “It’s easy for momentum to take over. Slow down, step aside and put together a plan for contingency and business succession.” Besides planning on how to save for your future it has become a reality that the money you have saved in your lifetime on top of social security may not be enough to support you after you’ve stopped working especially on the account of the inflation rate. Most retirees of middle to upper middle class backgrounds tend to overspend what they have saved as they are not accustomed to spending 70-80% of their income to get by but one of the ways they can avoid this is by proper budgeting habits and taking small non labor intensive part time jobs. Retirement is also the perfect opportunity to find new hobbies and do more exciting things like travelling or doing creative projects at home.
One of the pros of retiring is not having to deal with the stresses of work as one retiree Steve Parsons puts it “Think of day one of your retirement as your first day on a new job. Sure, things will be different. Just remember all the things you will no longer have to do: endure a performance review; ask for time off; bring food on food day; endure a pointless meeting; or listen to a co-worker drone on and on about their cat or kid.” Being a business owner means you have to look out not only for the best interest of your business but your own as well and the better you prepare for your future the less you have to worry about how you’re going to manage so you can enjoy your golden years.