Financial Serenity Month - Chapter 3

Last week we discussed about the retirement ideas that pertain to entrepreneurs. This week we will also include the employees in our conversation. I would like to share some scary statistics, with the hope that you take them seriously and act on the information we are sharing here.

For someone who has a job, the retirement planning is set in place by the employer, and all they have to do is follow the system. Even with all the steps already planned, a large number of Americans do not take advantage of the offers. And the scary part is that among solopreneurs and the self-employed (without the path already designed for them) the numbers are even higher.

There are some really scary statistics I want to share: only 2 out of 3 Americans save for retirement currently (according to a statistic from 2017). And if this is not bad enough, more than half of the ones who save, have less than $10,000 in their retirement account. Yet, surveys say that 51% of Americans feel they are saving enough. The article I was reading was stating that “Transamerica found that only about half of workers feel they are building a nest egg that will sustain them in retirement” (The Motley Fool, April, 16^th, 2017). While the article implies there are not enough people who are comfortable with their level of savings, my first reaction is: how can that many people even feel they have enough? Reading the statistics, I realized that only about 30% of the U.S. population has more than $10,000 in retirement savings. And with that being the case, where does the extra 21% of people get their feelings from? Did I scare you yet?

As entrepreneurs, solopreneurs and self-employed increase in numbers all across America, this is a unique opportunity for them to change these statistics. I’m not saying it is easy but it is simple: there is no other way to be and feel secure in retirement. Even employees who see their retirement coming from the employer diminish, have to also set aside money. Entrepreneurs don’t even have that luxury. There is no cushion that can provide a feeling of security. For those who can sell their business, there may be a stress-free retirement in sight. But the majority of small businesses – the solopreneurs and the home-based businesses – will probably never have that option.

If you own a sellable business and decide to sell it, the first thing you need to find out is the value. And you need to understand that the value you think it is worth and the amount of money that someone is willing to pay may be two different things – as is most often the case. After having a valuation done by a third party, such as a CPA, the next best step is talking to a financial specialist who can educate the seller in a few options – financial and insurance products – that can be set up by the buyer in order to increase the amount received by the seller through this transaction. This is a way to increase either the retirement income or the family protection, or both.

When selling the business is not an option – or if you want to have more money in retirement to ensure enough income – the best idea is to start saving as early as possible. Now, I understand that most entrepreneurs reinvest the majority of their income in order to grow their business. Even so, retirement savings must be a priority. And if the 10% that financial advisors advocate sounds like too huge and intimidating of a number, it is OK to start with a lower percentage. The main goal is to start. You can always increase the amount. Plus, something saved is always better than nothing saved. One of my favorite quotes is a Chinese proverb: “the best time to plant a tree was 20 years ago. The next best time is now.”

Saving – for retirement, for a big-ticket item, or for a rainy day – works the same way. The younger you are or the earlier you start saving, the more time you have for it to grow.  But it is never too late to start, and you are always better off starting to save NOW than Never, or even Later.