Retirement planning encompasses the plans and actions that individuals take to prepare a smooth transition from a life based mainly around working to a life based mainly around not working.
Retirement planning is especially important for business owners because their retirement is their own responsibility. With no company pension plan as support, their standard of living in retirement is up to them.
This isn't the reason that retirement planning for small business owners has become such a hot issue, though; the reason is the sheer numbers of Canadian small business owners that are retiring.
A CIBC study on retirement planning found that 500,000 Canadian small business owners are planning to retire over the next three years and another 750,000 are expecting to retire by 2020. That means that more than half of Canada's current small business owners are expected to retire over the next thirteen years.
The CIBC study points out that an astonishing estimated $1.2 trillion of assets will be changing hands by 2010 and highlights an equally astonishing lack of retirement planning on the part of small business owners; only 2 out of 5 small business owners have any kind of exit strategy and 60% of entrepreneurs aged 55 to 64 have not yet started discussing their exit plans with their family or partners.
Obviously, Canadian small business owners need to get more involved with retirement planning - especially as the kinds of retirement planning issues that small business owners have to deal with, such as business valuation, RRSPs, possible family succession, and limiting the tax bite are issues that can’t be dealt with overnight.
If you are a professional or small business owner, you may wish to read my review of The Canadian Small Business Owner's Guide to Financial Independence by Barry and Mark McNulty; it's a retirement planning guide that I recommend.
