A retirement plan can help ensure that a business owner will have enough money to live on in their later years. Surprisingly, however, many entrepreneurs do not have such a plan, and some aren't even concerned with having one at all.

According to research from Manta, a third of small business owners do not have a retirement plan in place.1 About 36 percent of those surveyed planned on seeking out other job opportunities upon retirement from their business. Why don’t entrepreneurs do a better job planning for their retirement years? Here are a few reasons:

1. Any extra money goes into the business

Because entrepreneurs are constantly concerned with the growth of their business, any extra money often goes right back into the business itself. Sales can fluctuate from week to week or month to month, and there is no guarantee that the business won't be strapped for cash, so many will forego a retirement plan in favor of improving cash flow.2

2. Planning to retire from sale of the business

Manta found that 18 percent of entrepreneurs without retirement plans intend to use the sale of their business to fund their retirement. This is a common sentiment among entrepreneurs, but the reality is that the business may fold before that time comes, or the sale may not prove to provide the amount of money needed for a sustainable lifestyle in retirement.

3. Using money from previous retirement plan for business

Business owners may end up sacrificing the fund that they've already accumulated, out of desperation and/or the desire to get a business off the ground or in better financial shape.

According to the Manta survey, as many as 21 percent of entrepreneurs who said they don't have a retirement plan in place said the reason is that they used the money from a previous retirement plan for their business.

4. Consumed by paying back student debt

According to Business.com, recent graduates carry an average student loan balance of over $35,000, and many would-be entrepreneurs are "scared off from trying to turn their innovative ideas into a business."3 With that in mind, it's easy to imagine that many of those who actually have taken the plunge into entrepreneurship are not prioritizing retirement when they're just trying to get on top of the debt of their education.5

5. Not being frugal

Some business owners may not have the extra money to put toward their retirement simply because they aren't being frugal with the money they have. If this includes you, look for ways to reduce or eliminate unneeded expenses and put that money to better use in a retirement plan.

6. Don't see a need to plan

Believe it or not, many entrepreneurs simply don't see the need to have a retirement plan. In fact, Manta's survey indicates that 12 percent of those without plans cited this as the reason. Perhaps in a related reason, 12 percent more said they don't plan to retire at all.

7. Procrastination

Some entrepreneurs – especially those on the younger side – may simply employ an "I'll start doing that later" attitude when it comes to saving/planning for retirement. Getting a business off the ground can be an all-consuming endeavor, and the end of business ownership can be the last thing on an entrepreneur's mind.

8. Business isn't booming

Based on the Manta survey, the number one reason that entrepreneurs do not have a retirement plan is that they don't make enough profit. If a business owner is trying to make enough to keep the business afloat and take home a living salary at the same time, retirement can fall down the list of priorities. It's no surprise that this is the most cited reason for a lack of planning.

Saving for retirement may not be the first thing you think about as an entrepreneur, but if you don't have a plan in place before it's too late, your retirement may not turn out the way you expect or want it to. Consider what you can do now to put a plan into motion.


This article from Nevada State Bank explains why and how business owners should set up a retirement plan: https://www.nsbank.com/content/dam/nsb/nsbank/media/pdfs/financial-planning/FinancialPlanningMarch2017.pdf


1. https://www.manta.com/resources/small-business-trends/small-business-retirement-savings-plan

2. A business line of credit might be a good option to help with cash flow.

3. https://www.business.com/articles/student-loan-debt-is-scaring-entrepreneurs-away/


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A. Member FDIC