Indications are that when it comes to retirement, small-business owners have good intentions, but the follow-through on their plans often leaves something to be desired. cites a Wells Fargo/Gallup study showing that 82 percent of such owners are currently saving or investing money toward retirement, and that 76 percent believe they will have enough to live comfortably when they transition into that phase of life.

That was countered by a Manta survey of some 1,960 small-business owners. Of those, just 34 percent revealed they have a savings plan in place for their so-called Golden Years. And of those, 37 percent reported that they haven’t netted enough profit to save for retirement. Another 21 percent reported that they used their retirement savings to invest into their business, and 18 percent plan to sell their businesses to fund their retirement -- a common strategy, though not one that necessarily pays off.

“There is a risk level to it,” David Deeds, the Schulze Professor of Entrepreneurship at the University of St. Thomas in Minneapolis, told Forbes. “If the business fails, your wealth goes away.”

Forbes contributor Kerry Hannon noted that her father sought to sell his engineering and consulting firm when he stepped aside at age 70, fully aware that none of his four children wanted to fill his shoes.

Hannon went on to cite a BMO Wealth Management survey that supported Manta’s conclusions: Small-business owners are not often fully prepared for retirement. A whopping 75 percent of those respondents between the ages of 18 and 64 reported that they had less than $100,000 socked away for retirement; in the 45-to-64 age range, 32 percent fell into that category. 

Here are the best ways to combat this trend:

  1. Set up a succession plan: This could involve selling the business, passing it along to someone in the existing hierarchy or closing it and selling off its assets. Whatever the case, it is important for an owner to have a clear-eyed vision of a future where he or she is not involved in the company’s day-to-day operations. Doing so ensures future success, and clarifies things for all involved.
  2. Run the numbers: A simple question, really, and one faced not only by business owners but those in the public at large: How much cash is needed to retire? Steve Martin, wealth planning advisor at Oasis Wealth Planning Advisors in Nashville, told the National Federation of Independent Business that any analysis should include such things as cash flow and net worth projections, estimated living expenses, income taxes from a sale of the business or throughout retirement and major purchases after retirement. He added that it would also be wise to consider various what-if scenarios.
  3. Find the right retirement savings plan: There are, as outlined by, several options, depending upon the size of a business. A solo 401(k) is best for those who are self-employed or without employees. A Simplified Employee Pension Plan (SEP-IRA) is ideal for businesses with just a few employees, while a Savings Incentive Match Plan for Employees (SIMPLE IRA) is suitable for those with up to 100 employees.
  4. Keep it simple when it comes to investing: Forbes advises three different kinds of low-cost index funds -- one centered on the U.S. stock market, one in the U.S. bond market and one geared toward foreign markets.
  5. Establish an emergency fund: Every business has its ups and downs. It is vital to be prepared for them, not to mention special projects. offers the example of a company expanding to a new location, and how funds might need to be allocated to do so -- perhaps at the expense of upgrading an existing computer system, or something of that sort.

What should be clear, then, is that a small-business owner would do well to keep one eye on the present, another on the future. To do anything less is to invite future headaches.