The problem with retirement savings is that there’s no way to know exactly how much you must put away.
As Entrepreneur magazine notes, experts in the financial services industry typically advise that those looking to maintain their current lifestyle will need at least 70 percent of their pre-retirement income. However, figures from the Employee Benefit Research Institute’s 2010 Retirement Confidence Survey indicate that nearly half (49 percent) of retirees spend less than they did before, and 37 percent keep their spending level more or less consistent. Just 13 percent reported an increase in spending after they retired.
A 2011 study by the Guardian Life Small Business Research Institute found that less than half (45 percent) of small business owners feel well-prepared for retirement, and nearly two-thirds feared they would outlive their savings. Specifically, just nine percent see themselves fully retiring in their mid-60s and never working for a living again.
Of the 1,433 small business owners surveyed, all of whom operated companies between two and 99 employees, 39 percent expected to trade off between periods of work and leisure, 14 percent planned to engage in part-time work, 14 percent aimed to carry out volunteer work as well as paid work and ten percent expected to work full-time.
“For many small business owners, the conventional concept of retirement is not realistic,” said Mark Wolf, director of The Guardian Life Small Business Research Institute, in a statement. “They feel that keeping their business going and working in it full- or part-time are essential steps to provide a continuing income stream to supplement savings and investments diminished by the recession.”
The study also found that just one-third of entrepreneurs have a succession plan, and only 19 percent plan to create one over the next 12 months. Typically, small business owners are too caught up in the tasks that keep their companies running from one day to the next to focus on the bigger picture. Because of this, many don’t start planning for succession far enough ahead of time – ideally five to ten years before a projected transition.
Set Out Your Retirement Financial Goals With First United Bank & Trust
Representatives at a community bank like First United Bank & Trust can give entrepreneurs financial tips to help them implement a succession framework and plan for their golden years. Contact us or find your nearest branch online to get started today!