The Retirement Confidence Gap Facing Women Business Owners

If you own your business, you are also, by default, in charge of funding your own retirement. There is no employer plan doing the heavy lifting for you, no pension arriving automatically. And according to a widely cited study by The American College's State Farm Center for Women and Financial Services, which surveyed 835 women business owners, most of you already know that.

The study found that 84 percent of women business owners are concerned or very concerned about retirement planning. That is not the surprising part. The surprising part is what happens next: despite that concern, most have not actually done the planning work. It is a gap between how people feel and what they have actually done, and it is worth closing before it becomes a problem you cannot plan your way out of.

The numbers behind the gap

A few findings from the research stand out, because together they paint a clear picture:

84 percent are concerned about retirement planning, yet 51 percent believe they have already paid adequate attention to it
34 percent, roughly one in three, have never estimated how much they will actually need in retirement
77 percent do not have a written retirement plan
Only 23 percent have a formal, written plan for managing income and expenses once they retire
75 percent agree they take an active role in understanding their retirement needs, but only 47 percent feel confident their financial professional has told them they are on track

None of this means women business owners are not paying attention. It means the attention has largely stayed at the level of concern, rather than translating into an actual plan on paper. And a plan you are thinking about is not the same as a plan you could hand to someone else and have them understand.

Why business owners carry more retirement risk

Employees who participate in a workplace retirement plan get a version of structure built in for them: automatic payroll deductions, a plan administrator, an annual reminder to review their contributions. Business owners have to build all of that themselves, on top of running the business itself.

On top of that, women in particular tend to live longer than men, which means the money needs to stretch further, and healthcare costs in retirement tend to be higher than most people expect. The study found that only 42 percent of respondents were concerned about future healthcare costs specifically, which is lower than you would expect given how often rising healthcare costs come up in actual retirement planning conversations.

The overconfidence trap

Here is the part of the research that is genuinely useful to understand about yourself, not just about the data: business owners, as a group, tend to have a strong sense of self-efficacy. That is part of what makes someone start and run a business in the first place. But that same confidence can work against you in retirement planning specifically, because it is easy to assume that if it becomes a real problem, you will figure it out the way you have figured out everything else in the business.

The trouble is, retirement funding does not respond well to figuring it out later. Compounding needs time, business transitions need years of lead time to execute well, and the math on "how much do I actually need" does not change just because you feel confident you will handle it when the time comes.

The business-sale blind spot

This is the finding that should get the most attention, and it often gets the least. Roughly half of the women surveyed said they want to maximize the value of their business specifically to help fund retirement. Only 10 percent have a written plan to actually do that.

Separately, 40 percent said they expect they will not be able to transition the business at retirement, and 20 percent expect they will need to close or sell it outright, likely at a discount, simply because there is no plan in place. If a meaningful part of your retirement is supposed to come from selling or transitioning your business, that needs to be its own plan, built years in advance, not a hope that gets tested for the first time when you are ready to retire.

A checklist for closing the gap

None of this requires overhauling your entire financial life overnight. It requires turning general concern into a handful of concrete steps.

Get a real number. Estimate what you will actually need in retirement, based on your real expenses, not a rough guess. If you have never done this calculation, this is the starting point everything else depends on.
Put the plan in writing. A plan that exists only in your head is not a plan a spouse, family member, or advisor can step in and execute if something happens to you.
Separate your business exit plan from your retirement plan. They are related, but they are not the same document, and treating them as one plan is how the "sell the business" strategy quietly becomes a hope instead of a plan.
Do not count on the business sale as your only funding source. Build retirement savings outside the business too, so your retirement is not entirely dependent on one future event going well.
Choose an advisor relationship that is consultative, not transactional. The research found that women business owners are far more satisfied with advisors who explain and collaborate than with advisors who simply sell a product and move on.
Revisit the plan on a schedule, not just when something changes. A plan reviewed once and never updated is only slightly better than no plan at all.