By Kim O’Brien
New research from The American College, the nation’s largest non-profit educational institution devoted to financial services, reveals that in addition to not having pensions or 401(k) plans, an additional one-third of small business owners have failed to estimate how much it will actually cost them to retire.
What’s more, the mean age of the survey respondents was just over 50, which demonstrates an overall lack of preparedness among a group that should really start preparing for retirement now—especially since small business owners have no one else to rely on when it comes to putting their retirement plans in place.
Part of the issue is that small business owners are failing to recognize how multifaceted retirement planning has become in an increasingly complicated financial planning situation—one that needs to account for inflation, medical expenses, longevity and asset management as well as the accumulation and distribution of income, long-term care and tax management. In fact, less than half of small business owners think their retirement planning needs are complex.
And while small business owners may be tempted to rely on the success of their business as their sole source of income and retirement savings or only diversify their portfolios among stocks and bonds, there are other options they should consider to secure their retirement savings in today’s market. Among the products that are becoming increasingly popular among small business owners are indexed annuities. In fact, BusinessWeek.com recently posted a tip on its small business section about the benefits of these products, including guaranteed income in today’s volatile markets and tax deferred income, providing some beneficial cash-flow planning that every business owner needs.