More Than Half of Small-Business Owners Don’t Want to Retire

The FINANCIAL — Retirement is not necessarily a desired career outcome for many U.S. small-business owners.

The Wells Fargo/Gallup Small Business Index finds that if money were no object, over one-half (53%) of the nation’s small-business owners would continue working in a full- or a part-time capacity. Only about one in four say they would retire completely. These sentiments are essentially unchanged from surveys conducted in 2014 and 2010.

These and other results from the latest Wells Fargo/Gallup Small Business Index survey, conducted Feb. 6-10, provide insights into U.S. small-business owners’ views on a number of issues relating to their economic future.

If they do decide to retire, 76% of small-business owners feel they will have enough money to live comfortably in retirement, up from 66% in the first quarter of 2014 and back to the level seen before the recession, according to Gallup.

The Wells Fargo/Gallup Small Business Index survey has asked owners about retirement finances four times over the past decade. In 2007, before the beginning of the recession, 79% said they would have enough money to live comfortably in retirement. In 2010 and 2014, that percentage dropped into the 60% range, but it has now essentially recovered to where it was 10 years ago.

These figures are substantially higher than what Gallup has measured over the years when asking the same question of all nonretired adults. In April 2016, 48% of nonretired U.S. adults said they would have enough money to live comfortably in retirement. At its highest point in the pre-recession years of 2002-2004, nonretired Americans’ level of confidence in having a comfortable retirement reached 59%.

Owners Most Likely to Project Using 401(k)s, IRAs to Fund Retirement

When asked about sources of funds in retirement, 40% of small-business owners say retirement savings accounts such as 401(k)s and IRAs will be a major source of money — more than mention any other source listed. Between 22% and 27% of owners say a number of other entities will be major sources of money in their retirement — including Social Security, home equity, individual stock investments, rent or money from property or real estate, and regular savings accounts or CDs.

Further, 27% of owners say the sale of their business will be a major source of retirement money, while 23% give that designation to income from their business.

These projected sources of income mirror what Gallup has found from the general nonretired population. However, one exception is work-sponsored pension plans, which 26% of all nonretirees, but only 13% of small-business owners, cite as a major source of retirement money.

Most Owners Not Worried About Financial Issues in Retirement

Few small-business owners say they are “very worried” about a list of five financial problems that could affect them in retirement, perhaps reflecting that many don’t plan on retiring at all. They are most worried about paying medical costs in retirement (21%). But fewer than one in seven small-business owners say they are very worried about the other concerns tested, including the basic issue of not having enough money to pay cost-of-living expenses in retirement. Only 5% are very worried about not being able to sell their business.

Notably, owners’ worries about these issues have decreased for the three issues that were last measured in the first quarter of 2014. This most likely reflects owners’ generally more positive sentiments about their business and the economic environment in which it operates.

Bottom Line

Small-business owners have a more optimistic view of their retirement in 2017 than they did three years ago. This reflects a substantial uptick in optimism shown in the overall Wells Fargo/Gallup Small Business Index, which in turn reflects improved overall economic confidence. Small-business owners tend to have a more positive outlook about retirement than U.S. adults overall. Many owners don’t want to retire at all, but keep working in their business in some capacity as long as they are able. These attitudes reinforce a generally upbeat small business environment today.