Retirement for Women Business Owners: Only 50% Are Ready, Study Shows
According to a recent study performed by Leading Retirement Solutions, a mere 50% of women business owners and leaders that participated in a national survey claimed to be early savers or have above average confidence in their ability to retire at the age they hope to.
Women Business Owners More Prepared Than General Population
Though this is a far better percentage when compared to women in general, which sits at a meager 33% (according to another study by Prudential), it’s not great. If these numbers don’t surprise or shock you, they should! We are talking about 67% of the female population in the U.S. that are ill-prepared for retirement, and nearly half of women business leaders also fall into this category. These are staggering numbers in a time when pensions are going extinct like large land animals and social security can only be considered the spare tire to the car that should be driving your retirement.
A couple of questions probably surfaced in your mind as you read the statistics about retirement for women business owners above:
1. Why is there such a large discrepancy between retirement for women in general and retirement for women business owners/leaders?
2. Why are only about half of women business owners ready for retirement?
Well, the discrepancy question can certainly be speculated upon. We could easily observe that planning for retirement for women business owners is easier because money rotates around their lives daily — revenues flowing in and operational costs pulling it back out — it’s never far from their thoughts. Though there is no specific scientific data to support this conclusion, it’s not difficult to surmise that individuals working with the strains of daily finance would most likely be more financially literate and better prepared for the future. However, if women business owners are so financially savvy compared to their non-business counterparts, then why are only half of them prepared for retirement?
National Survey Conducted by Leading Retirement Solutions
Among other things, this is one area of concern that Leading Retirement Solutions set out to discover with their national survey. And what we found were three main reasons that explains why a large percentage of women business owners and leaders are not on the right path for retirement.
Reinvest in Your Own Company
One of the first results to surface from the study was an apparent yet unique challenge that emerging women business owners face when it comes to reinvesting back into their business. How much or what percentage do you reinvest into your own company? This question, of course, is highly relative to every emerging business out there and there is no simple answer for it. However, what our study uncovered was an apparent need for these emerging business owners to reinvest not only profits back into the business but savings as well. This, of course, leaves little to no savings for their own retirement.
In fact, one of the top mistakes women business owners and leaders make is not contributing even the minimal amount to their 401(k) or Defined Benefit Plan. Even contributing 1% of your compensation now is better than saving nothing at all. Moreover, if you’re just starting out in your career it’s best to contribute as much as you can while external expenses, such as those related to beginning a family, are low.
Pay Yourself First
Another way to make sure you are contributing to your 401(k) or Defined Benefit Plan is to pay yourself first. Think of retirement savings as a bill instead of a savings account. You have to pay your bills each month, right? If you don’t then you end up getting your car impounded, your cable turned off and the lights go out. Well, think of your retirement account as a way of pre-paying your bill that come due later in life, and if you don’t pay them then your retirement may indeed look pretty dark.
Watch out for the second posting in this three-part series where we will dive into the next result that emerged from this study on retirement for women business owners and learn how to avoid the pitfalls of poor retirement planning.
Kirsten L. Curry is an Entrepreneur, Attorney at Law, and Founder and President of Leading Retirement Solutions, a company that designs, sets up, and administers the right retirement plan for companies and their employees.