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Small Business Owner Retirement Traps to Avoid

Jeff Boettcher
Jeff Boettcher

Small Business owners may need to take an entirely different approach to retirement

Today, small business owners may need to take an entirely different approach to retirement planning than people did even just a few decades ago. Gone are the days of relying on a defined benefit (pension) plan where income was guaranteed by your employer to last for the rest of your life, and possibly even the lifetime of your spouse or partner.

In fact, in many cases - especially for small business owners who rely upon their business to create current income and also their retirement opportunities - you may find that the income you can count on in retirement will be entirely up to your personal savings and investments.

On top of that, people are living much longer now than ever before. With that in mind, it is critical to ensure your retirement cash flow will have the potential to increase over time to help keep pace with the rising cost of the goods and services that you need. 

Because there are so many parameters to will impact your retirement income, it is easy for small business owners to fall into retirement planning traps. Therefore, it is important to be aware of these, so traps to avoid inadvertently sabotaging what you are ultimately hoping to attain. 

Underestimating the Cost of Retirement 

One of the biggest traps that small business owners need to be aware of is properly estimating what it will cost to retire. There is a myriad of information available today that may prompt you to reach a certain "number" for your retirement. 

While accumulating assets for the future sounds good in theory, the reality is that retirees don't live on net worth, they live on income. Regardless of how much you have stashed away, the key is your ability to readily turn those assets into income that you can live on for possibly a 20 or 30-year period or longer. 

There are also many investors and small business owners who are under the assumption that living expenses will go down when they reach retirement, which also includes the myth that you will be in a lower tax bracket upon retiring. 

Unfortunately, assuming either one or both of these theories can be detrimental to what you've planned for and are very likely incorrect.  For instance, while some expenses in retirement may decrease - such as transportation, and personal care (items like new clothing) - other costs will likely go up. 

For instance, it is realistic to assume that your health care costs will rise as you age. In fact, it has a 65-year-old today can expect to spend approximately $130,000 on health and medical expenses throughout their retirement, two which is over and above any amount provided by Medicare. 

A large chunk of these expenditures can come from out-of-pocket responsibilities such as copayments, coinsurance, and deductibles. These expenses can drain even more of your savings if you're married because the $130,000 figure is for an individual, not a married couple. Therefore, married couples can, on average, plan to shell out well over $200,000 in uncovered health and medical costs in retirement. 

But wait, there's more! These figures also don't take into account the possibility of a long-term care need, which according to the Genworth 2016 Cost of Care Survey, can run you somewhere in the neighborhood of $82,000 per year for an average of a little over three years of usage, per person. (Based on the national median daily rate of $225 per day for a semi-private room in a skilled nursing facility). 

Unless the cost of retirement - as well as the ancillary expenses like health care - are properly estimated, it can make a tremendous difference in how, and how well, you can live in your "golden years." 

Not Having Clear Retirement Goals - And a Plan to Make them Happen 

Although most people focus on the financial aspect of retirement, there is another trap that small business owners especially can fall into. That is not having a clear cut plan for what you will do when you retire. 

Sure, lounging on the beach or playing 18 holes of golf every day can sound exciting - especially in the midst of the stress that can come along with running a company. But, the truth is that what may seem like a dream to the working world can become a bit mundane after you retire. 

With that in mind, it is very smart to have a plan for what you are going to do once you leave the office for the last time. For example, have you always wanted to drive to all 50 states, write the next great American novel, or volunteer with a particular charity? If so, then now is the time to get all your ducks in a row, so that you can move into the next phase of your life seamlessly. 

Retirement can prove to be difficult to transition into, for Small Business owners, who have been responsible for so much during their careers, often managing multiple job functions within their company.  

For people who have spent so many years being pressed to maintain the interconnected mechanics necessary to run a successful small business, if you retire without an understanding of what your post-work life will consist of - boredom can become a significantly negative issue. 

Trying to Plan on Your Own 

While most business owners are entrepreneurial by nature, ensuring that you have enough money for retirement - and developing a plan for how to get there - should not be a do-it-yourself project. Rather, working with a financial advisor who is not only in tune with the unique needs of small business owners and how to help you grow your retirement nest egg but also how to help you convert those savings into continuous, future, income streams is a key. 

That's not to say that you should not be involved at all. Nailing down your goals, and then being involved in the planning and reviewing process is certainly important. But, running a business often requires its own level of expertise and focus, which means trying to manage your retirement plans as well - seems counterproductive.  Therefore, if you are a small business owner, you should focus your energies on making your company as successful as it can be, and you should find an expert who understands the special opportunities available to small business owners and how to help you maximize them.






For informational purposes only. Articles are not to be considered investment advice nor an offer to buy or sell securities. Investment advisory services offered through BWM Advisory, LLC (BWM). Due to various registration requirements concerning the dissemination of investment information and/or advice this information is only available to residents where BWM is currently registered or where State determined registration thresholds have not been met. Please visit for a current copy of the Firm's ADV and registration information.


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Jeff Boettcher
Jeff Boettcher Member
Jeff Boettcher is the founder and principal of 2 financial services firms and a software development company ( The companies that Mr. Boettcher owns provide retail and business clients (, other Advisors (BWM.Investments) along with Insurance Agents (, advice and solutions on how to grow and protect wealth either for themselves or the clients that they serve. Jeff Boettcher is also a published author and consistent contributor to Public Sector Retirement ( along with being the very proud father of two wonderful girls. Outside of work Mr. Boettcher enjoys hiking, golfing, and spending time with his wife and growing family. Jeff Boettcher's Industry Experience; Over 20 years of financial industry experience, Over 15 years offering retail investment advice, Small business owner, Real Estate Investor, One of the youngest Senior Vice Presidents in the Country for Wachovia Securities - Private Bank (2007), Founder and President of the SEC Registered Investment Advisory Firm - BWM Advisory, LLC (d/b/a Bedrock Investment Advisors) Accredited Investment Fiduciary (AIF®) For informational purposes only. Articles are not to be considered investment advice nor an offer to buy or sell securities. Investment advisory services offered through BWM Advisory, LLC (BWM). BWM is registered as an investment adviser with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Please visit for a current copy of the Firm's ADV and registration information.