Economy

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

More Than Half of Small-Business Owners Don't Want to Retire
by Coleen McMurray and Frank Newport

Story Highlights

  • 76% of small-business owners optimistic about living comfortably in retirement
  • Over half don't want to fully retire
  • 30% have a succession plan for their business

PRINCETON, N.J. -- 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.

If money were no object, which of the following would you do today?
Continue working in current business^ Start another new business Work for someone else Retire completely Don't know/Refused
% % % % %
Quarter 1, 2017 53 17 2 27 1
Quarter 1, 2014 55 13 4 26 2
Quarter 3, 2010 51 18 2 28 1
^ Question wording: Continue working full or part time in your current business
Wells Fargo/Gallup Small Business Index Survey

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.

When you do retire, do you think you will have enough money to live comfortably, or not?
Yes No Don't know/Refused
% % %
Quarter 1, 2017 76 21 3
Quarter 1, 2014 66 30 4
Quarter 3, 2010 63 33 4
Quarter 4, 2007 79 16 5
Wells Fargo/Gallup Small Business Index Survey

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.

When you retire, how much do you expect to rely on each of the following sources of money -- will it be a major source of income, a minor source of income or not a source at all?
Major source Minor source Not a source
% % %
A 401(k), IRA, Keogh, or other retirement savings account 40 39 20
Social Security 27 60 12
The value of the sale of your business 27 38 33
The equity you have built in your home 27 42 30
Individual stock or stock mutual fund investments 24 44 30
Rent or money from property or real estate 23 35 41
Income from your business, even after your retirement 23 41 34
Other savings such as a regular savings account or CDs 22 54 23
A work-sponsored pension plan 13 22 63
Annuities or insurance plans 11 42 45
Money from inheritance 9 30 60
Part-time work 6 51 42
Wells Fargo/Gallup Small Business Index Survey, Feb. 6-10, 2017

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.

Thinking ahead to retirement, please tell me how concerned you are right now about each of the following financial matters.
Very worried Moderately worried Not too worried Not worried at all
% % % %
Not being able to pay medical costs of a serious illness or accident in retirement
2017 Quarter 1 21 25 26 27
2014 Quarter 1 31 26 22 19
2010 Quarter 3 35 29 19 16
2007 Quarter 4 23 24 24 27
Being able to build back retirement savings lost during the recent economic downturn
2017 Quarter 1 14 28 25 31
2014 Quarter 1 23 27 24 21
2010 Quarter 3 36 32 17 13
Not being financially prepared for an unexpected life event
2017 Quarter 1 14 31 28 27
Not being able to pay for basic cost-of-living expenses in retirement
2017 Quarter 1 10 22 32 36
Not being able to sell your business when you are ready to sell it
2017 Quarter 1 5 16 26 48
2014 Quarter 1 15 18 27 35
Wells Fargo/Gallup Small Business Index Survey

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.

For more information about retirement issues, see the Wells Fargo/Gallup Retirement and Investor Optimism Index.

Survey Methods

Results are based on telephone interviews with 602 U.S. small-business owners in all 50 states, conducted Feb. 6-10, 2017. The margin of sampling error is ±4 percentage points at the 95% confidence level.

For more information about Wells Fargo Works for Small Business, visit WellsFargoWorks.com. Follow us on Twitter @WellsFargoWorks.

Learn more about how the Wells Fargo/Gallup Small Business Index works.


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