It's not easy owning a small business, and this is particularly true when it comes to taking the time to build and cultivate a healthy nest egg for their necessary retirement savings. New data shows that many entrepreneurs are now lagging behind in this regard, and some are starting to look for ways to address this potentially major problem.
Recent data from American Express suggests that as many as 60 percent of small business owners nationwide are not likely to retire on time simply because of the ways in which their current savings are shaping up, according to a report from The Associated Press. In addition, close to three out of four also say that they're worried about their abilities to live comfortably once they want to call it a career. The reason for this trend, though, is relatively easy to understand: The recent economic downturn led many to make difficult decisions about the number of workers they employed and the salary they took home just to keep the lights on, and therefore they may have been more focused on keeping their companies afloat than building their own retirement savings.
"We're plowing all our money back into the company … and taking a nominal salary," Michael Maher, the 28-year-old co-owner of San Francisco clothing store Taylor Stitch. "I am investing money in a business that … I control instead of investing in something that I don't control. I'm controlling my own destiny."
It's only in recent months that many have even been able to start thinking about the ways in which they could begin to get their retirement savings back on track once again, the report said. Many other owners may also feel as though their companies themselves are their retirement savings; that when they decide to leave the company, they will have built it up to the point at which they can draw an annual "salary" from it that is sizable enough to live on.
What others are doing
However, for those who want to actually build their retirement savings through traditional means, such as a 401(k) or IRA account, many are now starting to make moves that would allow them to increase those coffers relatively quickly, the report said. For instance, some owners are now contributing a small portion of their salaries to these funds, as any other employee might, while also receiving a match from the companies. In addition, many are also moving any distributions they may receive from the company directly into those accounts.
Decisions such as these can certainly diminish their already-slashed take-home pay, but it will also put them in a better position going forward when it comes to living comfortably after they stop working every day, the report said. Others may contribute even more of their salary to those savings efforts so that they don't have to work well past the federal retirement age, which is when many have been planning for decades to stop working, and may now be unwilling to alter those plans.
Owners who want to free up a little extra cash that they could invest in their own retirement savings may also want to look at what they're currently paying for small business insurance. Trying to find more affordable options when it comes to policies for workers' compensation or general liability insurance may help to make overall business costs more affordable, allowing entrepreneurs to start building up their savings to more respectable levels that will, in turn, help to ensure a far more comfortable retirement going forward.