Millions of Americans saw their retirement savings efforts take significant hits during and immediately following the recent recession for a number of reasons, and one group that may be having particular issues with this fact is small business owners. Many seem to now be ignoring their savings efforts in an attempt to keep their companies afloat.
A recent survey of small business owners by American Express found that three in five are not on track to meet their previous retirement goals, and close to three-quarters also say that they're worried about their ability to live comfortably once they call it a career because of their current standing in this regard, according to a report from the Associated Press. Again, though, much of this might be the result of the recession, during which owners had to stop making nearly all contributions to their own 401(k)s or other savings accounts and pour more money into their business.
Another survey of small business owners from the first quarter of the year, conducted by both Pepperdine University and Dun and Bradstreet Credibility Corp., found that 42 percent of small business owners used their own money or assets to fund their companies, and of that group, four in five did so with money they'd put into savings or other investments. The latter number was an increase from the numbers seen just a year earlier, when 46 percent of owners poured their own money into their companies, but just 68 percent dipped into savings to do so.
It seems that the reason for this trend is simple enough: Owners didn't believe their companies would be able to survive without that cash infusion, and they had to get it somewhere, the report said. In addition, many owners may see their companies as their best chance for receiving a sizable retirement income once they stop working, as long as they can get off the ground and start running successfully in the nearer term. The improving economy has done little to dampen these expectations, and some owners are projecting sales or revenues to grow sharply in the next year or two.
Historical data not much more encouraging
In addition to the new trends, it should be noted that mall business owners have generally tended to not make contributions to their retirement savings in the past either, the report said. For instance, a study conducted by the U.S. Small Business Administration found that in 2006 (before the economic downturn) only about one in three small business owners had retirement accounts or made regular contributions to them, and that included just 18 percent who had 401(k)s. That's down considerably from the national average seen in 2007, at which point about two-thirds of all American families had at least one such account.
This trend is, perhaps not surprisingly, more pronounced among younger small business owners, the report said. Less than 17 percent of owners under 35 had IRAs seven years ago, though that number doubled to people between the ages of 35 and 49 years old, and went up to 41 percent for people 50 years old or more. Nonetheless, these people may be putting themselves at significant financial risk, and may force themselves into situations in which they are never able to retire completely.
For this reason, owners might want to look into ways to reduce their companies' costs so that they can put more toward their retirements. One way it may be possible to do this is by finding ways to reduce small business insurance costs, including seeking out lower-cost coverage for general liability insurance, or workers' compensation insurance.