Grim retirement forecasts may force SBO's to get creative

6/28/2011

According to a recent study by insurance company Guardian Life's Small Business Research Institute, many small business owners lack the traditional view of retirement.

A total of 1,433 small business owners who operate companies with anywhere from 2 to 99 employees were polled, and nearly 66 percent reported they fear outliving their retirement money, while 33 percent plan to work into their seventies.

"For many small business owners, the conventional concept of retirement is not realistic," said Mark Wolf, director of the GLSMRI. "They feel that keeping their business going ... are essential steps to provide a continuing income stream to supplement savings and investments diminished by the recession."

The Wall Street Journal reports that to counter the threat of retirement issues, professional advisors are concocting new retirement savings options for small business owners.

One strategy involves taking advantage of the Tax Relief Act of 2010, through which the federal gift-tax exemption rises from $1 million to $5 million through 2012. An owner can initiate a sale of grantor trust and sell the business' assets of his or her children to receive the bonus.

Another option involves borrowing against one's own business to fund an annuity, as borrowers who invest in equity-indexed annuities receive protection from stock market losses.