Older business owners are delaying their retirements – and need advisors’ help

More Americans turn age 65 this year than ever before, and many of them own small and medium-sized businesses. However, a new Nationwide Retirement Institute survey found many older business owners near retirement years (aged 60-65) face significant challenges preparing for the next chapter in their careers – and lives.

For example, about a third (36%) of older business owners report they have pushed back their planned retirement date in the past year. The survey revealed several financial reasons why they have made this decision, including:

• They’re worried they don’t have enough money saved for the income they need in retirement
• They feel they won’t be able to live the life they want in retirement
• They had to reduce the amount they have saved due to economic conditions
• They or a family member have costly health-related expenses

 

For some older business owners, the next horizon isn’t even on their radar. About one-fifth (19%) of respondents aren’t even thinking about retirement right now.

The succession planning gap

Given the percentage of older business owners that have had to delay their retirement, it’s no surprise that succession planning is also a challenge. More than one-third (35%) of respondents said they don’t have a succession plan but are currently developing one. Another 16% said they don’t have one in place and don’t have plans to develop one.

The impact of not having a succession plan can be catastrophic for the business. Those who don’t have a succession plan say they intend to sell their business to a family member or trusted employee, close the business and liquidate assets, transition ownership to a co-owner or business partner or explore the possibility of selling to external buyer or investor.

“Business owners have worked hard to build their businesses, but they need help transitioning leadership to leave a lasting legacy,” said Juan Jose Perez, president of Nationwide Corporate Solutions. “Advisors can help them place a value on the business and consider the financial implications of selling it or transitioning it to a family member, partner, employee or investor. A strong succession plan may also help them boost confidence in their ability to retire and achieve financial security.”

The important role of advisors

The older business owners surveyed value outside financial advice for their business. Nearly half (45%) of respondents say they currently work with a financial advisor or planner and about two-thirds (65%) said they either have met with one in the past six months or plan to do so in the next six months. Additionally, 32% say they currently work with a third-party administrator for employee retirement benefits and 30% say they currently work with an employee benefits consultant.

Those with a financial advisor or planner for their business say they are most likely to talk to them about succession planning, inflation, access to capital, high interest rates, employee benefits, and economic uncertainty.

Those who don’t work with a financial advisor or planner say it’s because it costs too much, they don’t need advice because they can handle their finances themselves, they are too busy, or don’t know where to go to get advice.

“Our survey sheds light on several ways a financial professional can help older business owners – both with personal retirement planning and supporting their business,” said Perez. “Understanding the perspectives of this group can help advisors more effectively engage new and existing business clients by meeting them where they are with timely advice and solutions.”

Business owners interested in addressing employee benefits and access to capital

Top challenges older business owners expect in the next 12 months include the rising cost of employee benefits and attracting/retaining employees. In the past six months they report dealing with employees asking for better compensation, more or better benefits or leaving for companies with better benefits. As a result, more than four in 10 (44%) have already or are planning to improve retirement plan offerings for their employees.

Some have already taken or are considering actions that could be potentially detrimental to their long-term financial security, including:

 

• Using personal savings to support their business (51%)
• Applying for a personal loan to help support the business (44%)
• Canceling or postponing a major business investment (51%)

 

“Beyond personal retirement planning, there’s an opportunity for financial advisors to drive conversations about employee benefit offerings and access to capital,” Perez said. “Advisors have the opportunity to help business clients consider solutions that may help them attract and retain employees and avenues for accessing capital that may help them avoid taking on unnecessary personal risk when it comes to running their business.”

Preparing for economic disruption

There is anecdotal evidence the business disruption most business owners experienced during the pandemic may have led to a more proactive approach to preparing for the unexpected. More than seven in 10 (73%) older business owners feel at least moderately to extremely prepared to navigate the next major disruption to their business. They are taking proactive steps to manage risk, including:

 

• Planning for potential crises
• Implementing or updating business continuity plans
• Investing in cybersecurity
• Performing a risk management audit
• Expanding their list of risk management partners

 

“It’s encouraging to see business owners being proactive and feeling confident in preparing for the unexpected,” Perez said. “I encourage advisors to position themselves as a risk management partner who can help business clients think about potential financial disruptions and consider protection solutions, new avenues to access emergency capital – and even identify other partners to bring to the table who could contribute to a broader risk management strategy for their client.”

View an infographic summarizing survey data

Survey Methodology
Edelman Data & Intelligence conducted a national online opinion survey from May 1-15, 2024 among 400 small business owners and 400 medium business owners including an oversample of 100 businessowners ages 60-65.