According to TD Wealth’s Business Owner Retirement Readiness survey of over 1,000 high-net-worth individuals who own a business, 95 percent of those surveyed are confident (very or somewhat) that their financial plans will be able to generate the income needed during retirement. However, as business owners approach retirement age, confidence dwindles.
Millennial business owners reported the highest confidence in their post-retirement income, with 78 percent very confident their long-term investment plans will lead to the achievement of their goals, followed by Gen Xers at 69 percent. Despite being the closest to retirement of the age groups surveyed, only 59 percent of baby boomers are very confident their long-term plans will allow them to achieve their goals.
“High-net-worth business owners face a myriad of challenges when it comes to their financial security in retirement,” said Ken Thompson, head of trust & investments for TD Wealth. “A financial plan is not only crucial to having confidence in retirement, but also to confidence in a business owner’s exit strategy, succession and estate planning, and other priorities that are vital to achieving financial goals.”
Advisors can boost confidence
Seven out of 10 business owners surveyed indicated they work with a financial adviser. Surprisingly, millennials were more likely to work with a financial adviser (77 percent) than baby boomers (64 percent). Business owners who work with an adviser are also significantly more likely to be confident in their future income compared to those not working with an adviser.
“While everyone can benefit from working with a financial planner regardless of age or net worth, business ownership adds an entirely new dynamic and complexity to retirement planning that necessitates a very particular expertise,” said Thompson. “Just as the long-term goals of an individual business are unique, so too are the individual financial goals for each business owner. Working with a professional adviser to establish a bespoke plan can help business owners prepare and feel confident as they head into retirement.”
Retirement ready or not?
In addition to the confidence business owners currently have in their retirement plans, and the relationship between their confidence and whether they work with an adviser, the survey explored other influences determining their retirement readiness. Such factors included desired age of retirement, what concerns could affect their goals and where respondent’s income will be derived from upon retirement.
The survey found that 66 percent of business owners expect to retire between the ages of 51 and 75. One in eight respondents age 55 and older plan to never retire (12 percent vs. 3 percent of younger business owners, ages 18 to 34). Those planning to retire at age 50 or younger skew younger. Fifteen percent of those planning to retire younger than 50 are between the ages of 18 and 34, and 7 percent are between the ages of 35 and 54.
Many business owners also have concerns around how external factors may impact their ability to achieving their financial goals, including economic uncertainty (50 percent) and market volatility (40 percent). Not surprisingly, concerns around health insurance costs increase with age, from 25 percent among millennials to 34 percent among baby boomers.
When it comes to retirement income, a healthy mix is important. Thirty-four percent of high-net-worth business owners estimate their retirement income will come from retirement savings plan (34 percent), investment portfolio (21 percent), Social Security (11 percent) and personal savings (10 percent), with the balance coming from other sources.
