Despite the economic and business impacts of the COVID-19 pandemic, business owners are largely staying the course for their retirement plans, according to the second annual TD Wealth Retirement Readiness Study, released today.
The study finds an overwhelming 85% of business owners say they have not made changes to their retirement planning as a result of the pandemic and its resulting economic volatility.
This despite the finding that 87% of all business owners surveyed reported their revenues have been impacted by COVID-19, with nearly half experiencing reduced operations (49%) and a quarter witnessing temporary or permanent closures (25%).
Sixty-nine percent 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.
“It’s no surprise that business owners struggled during the COVID-19 pandemic due to stay-at-home mandates and non-essential 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,” said Ken Thompson, Head of U.S. Wealth Shared Services at TD Bank. “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.”
While business owners in general are unsure how long they can sustain their business under current conditions, the study found high net worth (HNW) business owners are significantly more confident about their future retirement plans than their mass affluent counterparts. Ninety-four percent of HNW business owners remain confident (somewhat or very) that their financial plans will be able to generate the income needed during retirement, while only 82% of mass affluent business owners said the same.
Mass affluent business owners also said they are more concerned about economic or political uncertainty (73%) than HNW business owners (67%).
Advisors can boost retirement readiness
Sixty-one percent of business owners indicated that they work with a financial advisor. Millennial business owners were more likely to work with a financial advisor (68%) compared to Baby Boomers (58%). Of the business owners who have a long-term investment plan, 94% are confident (very or somewhat) that their long-term investment plan will lead to the achievement of their financial goals.
Of business owners surveyed, only 35% report having a fully integrated estate plan. However, 66% have a last will and testament and 44% have trusts (one or more). Only 12% of respondents reported that they do not have any sort of estate plan, signifying that most respondents are well-prepared for retirement with the proper estate planning.
“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,” said Alyson Klug, 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.”
When it comes to retirement income, a healthy mix is obviously important. For business owners, retirement savings plans constitute the highest proportion of retirement income, followed by investment portfolio and Social Security. Retirement savings and investment portfolios make up more than half of the retirement income across all respondents.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
