Despite the economic and business challenges caused by COVID-19, most small business owners have held firm in their retirement planning, but that could change, according to a new study.
In gauging respondents’ sentiment on retirement and financial planning, TD Wealth’s second annual Retirement Readiness Study found that 85% of business owners have not made changes to their retirement planning as a result of the pandemic, demonstrating that business owners are staying the course through economic volatility.
“It’s no surprise that business owners struggled during the COVID-19 pandemic due to stay-at-home mandates and nonessential business closures. Additionally, the impact of economic uncertainty, coupled with political uncertainty, are weighing heavily on the minds of business owners as they seek to recover their financial losses,” explains Ken Thompson, Head of U.S. Wealth Shared Services. “Fortunately, business owners recognize that despite the difficult and volatile economic times, it is important to continue saving for retirement and avoid adjusting a long-term plan for short-term volatility,” he notes.
But as the country continues to grapple with the economic impact of the COVID-19 pandemic, business owners are unsure how long they can sustain their business under current conditions.
According to the findings, 69% of business owners cited economic or political uncertainty as concerns when it comes to achieving their financial goals, as the economic impact of the pandemic and the 2020 election continue to be top of mind. Mass affluent business owners are slightly more concerned about economic or political uncertainty (73%), compared with high-net-worth business owners (67%).
Additionally, the survey found that 87% of all business owners surveyed reported their revenues were affected by COVID-19, with nearly half experiencing reduced operations (49%) and a quarter witnessing temporary or permanent closures (25%).
Confidence Boost
Most business owners (61%) also indicated that they work with a financial advisor. Of the business owners who have a long-term investment plan, 94% are confident—either very or somewhat—that their long-term investment plan will lead to the achievement of their financial goals. The survey also found that Millennial business owners were more likely to work with a financial advisor (68%) compared with Baby Boomers (58%).
“In a time where the world seems to shift under our feet as we speak, a financial advisor is key to help navigate economic volatility and stay on track for retirement,” emphasizes Alyson Klug, the firm’s Head of Mass Affluent, U.S. Wealth. “Many business owners could be facing the question of an early retirement due to the pandemic, and a financial advisor can help establish your goals, develop an estate plan and create a bespoke long-term investment plan that allow business owners to navigate the retirement journey with greater confidence,” Klug adds.
Additional findings show that nearly all (94%) high-net-worth business owners are either very or somewhat confident that their financial plans will be able to generate the income needed during retirement; this was nearly the same as the 95% who said the same in 2019. Meanwhile, mass affluent business owners are slightly less confident, with 82% reporting that they are either very or somewhat confident that their financial plans will be able to generate the income needed during retirement.
Maru/Matchbox conducted the survey in July 2020 on behalf of TD Wealth targeting business owners and individuals with investable assets over $100,000 with the objective of assessing their retirement plans and the future of their business. A total of 1,296 responses were collected, split across high net worth business owners and individuals (investable assets over $500,000) and mass affluent business owners and individuals (investable assets of $100,000–$499,000).
