BMO Wealth Management issued a report Oct. 20, looking at how Canadian private business owners are planning to fund their retirement. The report: As a business owner, do you have a retirement contingency plan?, found that the majority are not financially prepared for the retirement they envisioned; however, they are considering various factors like increasing savings or selling the business to help reach their goals.
The report found that more than two thirds (72 per cent) have saved less than $100,000 and only 10 per cent had saved more than $500,000.
Business owners are facing a shortfall in their retirement planning and become heavily dependent on their business assets to help fund their retirement. The report indicates that withdrawing at a rate of $50,000 a year can cause a $500,000 pool of retirement savings to disappear in about 12 years, whereas the amount needed for a sustainable retirement between the ages of 65 and 90 is approximately $1,100,000.
“Retirement dates can vary for business owners depending on their personal and business circumstances. By revealing the shortfalls in a business owner’s retirement fund based on how much they’re saving each year, a financial plan will help them prepare for every circumstance,” said Chris Buttigieg, senior manager, Wealth Planning Strategy, BMO Wealth Management.