Increasingly more small business owners are uncertain about whether or when they will retire as they fail to apply their business and financial skills to their own finances.
A new KeyBank survey finds that while small business owners have confidence in their financial planning abilities, the majority pay little attention to personal financial matters, most notably retirement planning.The survey of 976 small business owners, fielded by Zogby International, shows that they are living contradictions when it comes to finances and retirement. Of those surveyed, 78 percent said retirement planning should be considered by age 30 and almost half (46 percent), said they have their plans set and on track. However, 67 percent believe they will, or could, run out of money in their lifetime.
“There’s conflicted confidence in what small business owners say they are doing and what they actually are doing. Consequently there’s real concern about how financially prepared they are for retirement,” said Marc Vosen, president of Key Investment Services. “While they know what it takes to be in control, many have a laissez-faire attitude when it comes to managing their money.”
Asked what they are more likely to do on a regular basis, 32 percent said they are more likely to get a physical exam from a doctor, 33 percent are more likely to get a tune-up from a mechanic, while only eight percent said they would review their finances with an outside expert.
REALITY SETTING IN
When asked to describe their current financial outlook in terms of a Reality TV scenario, 19 percent chose “Survivor.” The balance of respondents selected “Amazing Race,” “The Apprentice,” “Fear Factor,” “Extreme Makeover,” and “Lost” to best describe their situations.
Reality is beginning to hit home and changing circumstances are causing 40 percent of small business owners queried to reconsider their retirement age. Of those changing their plans, an overwhelming majority (85 percent) are delaying their retirement date. Reasons cited for the delay include the need for more savings (64 percent) and concern about rising healthcare costs (47 percent).
FROM PROCRASTINATION TO PROACTIVITY
Another reason why retirement may be put on the backburner is that small business owners are more concerned with immediate financial problems or issues. When asked “what keeps you up at night”, those surveyed put taxes, debt, government regulations and oil/energy costs at the top of the list. Vosen said they may also be procrastinating because financial planning sounds cumbersome, complicated and time consuming, but he adds, it doesn’t have to be. He offers the following tips:
1. Zero in and balance various needs
Identify the most important issues and utilize specialized tools to
assess them (e.g., mortgage, debt management, education savings or
retirement)
2. To visualize the future you want, take three simple steps:
1) Estimate the number of years you plan to live in retirement
2) Determine the lifestyle you want to have (similar to your life
today; more simplified; more travel; vacation home etc.)
3) Estimate the annual income you will need to have to live your
desired lifestyle (make a monthly budget, multiply by 12 and
include some unexpected expenses for additional security)
3. Calculate the cost of procrastination
The cost of procrastinating increases exponentially over the course
of only a few years. For example: A person investing $2,000 a year
between the ages of 21 and 30 will earn $347,508 more (by the age of
65) than one who invests $2,000 a year from the age of 30 through 65.
4. Bite the bullet
Review assets with a financial professional to ensure the money and
investments are working as hard as possible, now and in retirement
ABOUT KEY INVESTMENT SERVICES
Key Investment Services LLC, a FINRA registered broker/dealer, was established to support Community Banking clients with approximately 200 dedicated financial advisors across Key’s geographies. Through KIS, Key ensures that clients are aligned more closely with the proper delivery channels, offering a comprehensive set of investment and insurance solutions.
ABOUT KEYCORP
Cleveland-based KeyCorp (NYSE: KEY) is one of the nation’s largest bank- based financial services companies, with assets of approximately $100 billion. Key companies provide investment management, retail and commercial banking, consumer finance, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally. For more information, visit https://www.key.com/.
Investment products are offered through Key Investment Services LLC (KIS), member NASD/SIPC. Insurance products are offered through KeyCorp Insurance Agency USA, Inc. and other affiliated agencies (KIA). All are affiliated with KeyBank.
