Citing a recent survey from BMO Wealth Management, Financial Advisor IQ
has reported that most small business owners in the US haven’t saved for a comfortable retirement, possibly banking on a future sale of their enterprises.
According to BMO’s survey, which polled more than 400 business owners between 18 and 64 years old, three-quarters of American small business owners have less than US$100,000 set aside for retirement. Focusing on those aged 45 to 64, a still concerning 68% have less than US$100,000.
Only 8% of the respondents have put away more than US$500,000, but BMO says the amount is typically only enough for about 12 years. Eighty-one percent are saving just US$25,000 or less per year.
The majority of participants intend to sell or transfer their businesses, which could get them enough funding for retirement. But since a third of businesses owners are having a hard time getting successors, BMO warns that retirement savings are also critical.
Social Security isn’t projected to provide much relief either. Citing InvestmentNews
, the article reports that cost-of-living adjustments are being outpaced by inflation. Mary Johnson, a policy analyst for the Senior Citizens League, asserted that the federal government’s cost-of-living adjustment of 0.3% does not take into account what people over 62 actually need to pay for.
Services and products that matter most to retirees, notably medical and housing costs, have risen by 7% and 5% respectively in the past year. Medicare costs are also projected to spike by US$27.90, reaching US$149 per month for beneficiaries who earn too much to be eligible for the “hold harmless” provision – a group that accounts for 30% of Medicare requirements. Individuals who earn more than $85,000 as singles or $170,000 as married couples will also be facing a high-income surcharge on top of their premiums.
Considering such costs, Johnson said that the cost-of-living adjustment should actually be 2.1%.
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