Study Reveals Disconnect Between
Retirement Preparedness and Aspirations
NEW YORK, November 11, 2014— The Guardian Insurance & Annuity Company, Inc. (GIAC), a wholly owned subsidiary of The Guardian Life Insurance Company of America®, today released the results of a comprehensive national study showing that while many small business owners (SBOs) plan to sell their businesses to fund their retirement, few have identified possible buyers. While many SBOs have a generally positive outlook on how they will spend their retirement years, more needs to be done to prepare for that next phase. The study also showcases the differences in the attitudes of women SBOs on everything from business ownership to risk tolerance to planning for retirement.
The Small Business Owners Retirement Readiness Study shines a spotlight on small business owners’ perspective on retirement and provides a better understanding of their retirement needs and aspirations. Compared to the 2011 study, SBOs are feeling more confident, 52 percent of SBOs state they are either “very” or “fairly” well prepared for retirement, and 56 percent have a clear vision of how they will spend their time once they are no longer involved with the business (50 percent in the 2011 study).
For many, acquiring their retirement dreams will rest upon how they hand off their business. Thirty-five percent of respondents are counting on the sale of their business to be financially prepared for retirement (30 percent in 2011), yet, only 17 percent have identified potential buyers for their business. Increasingly more owners plan on using their small business to help fund their retirement. Thirty-five percent of SBOs stated they started their business to fund their retirement compared to 25 percent in 2011. Also, 39 percent of SBOs believe they can retire earlier than planned (31 percent in 2011) due to their small business. Overwhelmingly, the SBOs surveyed are risk-tolerant and feel that having their own business is the best way to create the wealth they want. However, it is paramount that these SBOs focus on an exit strategy to meet their retirement needs.
Looking at retirement from all angles
“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. The best approach is to work with the right financial professional who will design a customized plan and provide a clear understanding of how it will meet their retirement goals.”
The study also highlights a shift around the key motivators behind planning for retirement. More SBOs report that their spouses/partners are planning for their own retirement or are already retired, which puts pressure on them to begin their own planning. In 2011, two-thirds reported not having a written retirement plan. In 2014, half of the surveyed SBOs “spoke to their financial advisor” when financially preparing for retirement, while one-third are planning to fund their retirement with “retirement plans funded for their business” or “retirement plans/pensions from former employers.”
In contrast, the study uncovers that women SBOs are more likely to acknowledge that they are not as confident and financially prepared for retirement as their male counterparts (45 percent vs. 56 percent). They are more likely than males to prefer an advisor who pushes them toward their goals (33 percent vs. 23 percent), while males are more likely to want an advisor who is creative and takes calculated risks (28 percent vs. 21 percent). Key findings from the study are available in this infographic.
“Women SBOs can do more to prepare for retirement and feel as confident as their male counterparts. A retirement savings plan is an essential tool for any small business owner’s financial security. Yet, it needs to be put into motion many years before retirement,” adds Dubitsky. “Financial professionals play a critical role in educating and guiding participants and can help all SBOs optimize their retirement plans.”
The Small Business Owners Retirement Readiness Study can be viewed in its entirety here.
The online survey, sampled through the Harris Poll Panel, was fielded between May 28 and June 16, 2014, and is based on interviews with 1,487 Small Business Owners, ages 25–74, of for-profit organizations with 2–99 employees, who are either owner or part owner of a business with revenues of $500,000 or more, and whose minimum household income is $75,000.
A mutual insurer founded in 1860, The Guardian Life Insurance Company of America (Guardian) and its subsidiaries are committed to protecting individuals, business owners and their employees with life, disability income and dental insurance products, and offer funding vehicles for 401(k) plans, annuities and other financial products. Guardian operates one of the largest dental networks in the United States, and protects more than eight million employees and their families at 115,000 companies. The company has approximately 5,000 employees in the United States and a network of over 3,200 financial representatives in more than 80 agencies nationwide.