Small Business Owners Unprepared for Retirement
Most small business owners in the U.S. haven’t put away for a comfortable retirement and could be betting too much on selling their business to fund it, according to a recent survey from BMO Wealth Management.
Three-quarters of American small business owners have less than $100,000 saved for retirement, according to BMO’s survey of more than 400 business owners aged 18 to 64.
The figures aren’t much better even for the older ones: among those 45 to 64 years old, 68% have less than $100,000.
Just 8% of all respondents have been able to put away more than $500,000 for retirement, but BMO says that’s typically only enough for about 12 years. Meanwhile, 81% of respondents are only saving $25,000 or less per year, the survey found.
The majority of business owners plan to sell or transfer their business, which could — stress “could” — garner them enough to cover retirement.
But with a third of business owners having trouble finding successors, BMO warns that retirement savings are also important.
Meanwhile, business owners hoping for Social Security to help them through retirement may be in for a shock.
Recently, the cost-of-living adjustments simply haven’t kept up with inflation, InvestmentNews writes.
In 2017, the cost-of-living adjustment was just 0.3%. But if the federal government had actually taken into account what people over 62 need to pay for, that figure should have been 2.1%, Mary Johnson, a policy analyst for the Senior Citizens League, tells the publication.
That’s because services and products that matter most to retirees — medical and housing costs, especially — have gone up by 7% and 5% respectively in the past year.
What’s more, Medicare costs are about to jump $27.90 to $149 per month for beneficiaries who earn too much to qualify for the “hold harmless” provision — and that’s about 30% of Medicare recipients.
Meanwhile, those who make more than $85,000 as singles or $170,000 as married couples will be subject to a high-income surcharge on top of the premiums, according to InvestmentNews.