Retirement

Survey: 34% of entrepreneurs lack retirement savings plan

Key Points
  • 34 percent of entrepreneurs have no retirement savings plan in place.
  • The top reason is insufficient income from their businesses.
  • An expert gives advice on how to make better personal finance choices to build up a retirement fund.

It's not just millennials who are bad at saving for retirement — small-business owners are also failing to build up a retirement fund.

To that point, 34 percent of entrepreneurs don't currently have a retirement savings plan, according to a new survey by Manta, an online community for small businesses.

Their top reasons for not saving for retirement include insufficient income (37 percent), using previous savings to invest in their business (21 percent) and planning to sell their business to fund their retirement (18 percent).

Geri Lavrov | Getty Images

The survey queried 1,960 small business owners in June via an on-site poll.

Taking just a few minutes out of a busy day to stop and think about retirement is the first step, said John Swanciger, Manta CEO.

"Often just keeping [retirement] top of mind and checking in on it regularly, whether that's quarterly or twice a year, can really help to nudge you over the line to, even if you have [a fund], to ... make sure you're putting the most into it that you can afford, for your future," he said.

The next steps are to establish a plan and meet with a financial advisor, Swanciger said. Even if someone starts off depositing only small amounts, just starting that retirement fund is a big step.

Many entrepreneurs are skeptical of financial advisors because they're afraid of high costs and being locked into a plan, or they can't find the time to meet with one, he said. However, an advisor can draw up a blueprint and then the client can decide whether to take the advice.

There was some good news from the survey results: The entrepreneurs who are saving are saving in the best types of retirement funds, Swanciger said.

A majority of entrepreneurs, 43 percent, who do have a retirement fund use a self-employed 401(k) plan. The second-most-popular savings account is a traditional individual retirement account (31 percent) and third, the Roth IRA (29 percent).

The reality of these entrepreneurs' situations stands in stark contrast to their hopes, and the numbers just don't add up, officials of the study said.

Those who aren't saving must begin soon or they could face some harsh consequences. At some point in the future, they'll either have to get a second job or rely on federal or state help, Swanciger said. Even though 64 percent of respondents said they plan to stop working after retirement, they might not have that luxury.

Retirement's magic number: Do you have enough?
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Also, almost 60 percent hope to retire before age 65, according to the survey. Yet since one-third don't have a retirement fund set up currently, their chances of retiring at that time are slim.

There was another bright spot in the survey, however: 66 percent of small business owners do have a succession plan for their business. Oftentimes, that means they plan to pass down their business to a family member or sell it, Swanciger said.

These entrepreneurs have some type of plan in place for their business to generate future revenue. However, they have to focus not just on the future of their business, but on themselves too and their future needs, especially for retirement.