Almost three-quarters (72%) of Canadian small business owners have saved less than $100,000 for retirement, according to a new report from Toronto-based Bank of Montreal’s (BMO) wealth-management arm released on Thursday.

The report, which surveyed small business owners between the ages of 25 and 64, found that there is not a stark improvement in the level of savings for those who are closer to retirement. In fact, 61% of survey participants between the ages of 45 and 64 say they have saved less than $100,000 for retirement.

This is problematic as the amount required for a sustainable retirement that would occur between the ages of 65 and 90 is $1.1 million, BMO’s research states.

Only 10% of all survey participants indicate they have saved more than $500,000 while 14% of those between the ages of 45 and 64 can say the same.

“Retirement dates can vary for business owners depending on their personal and business circumstances,” says Chris Buttigieg, senior manager of wealth planning strategy with BMO Wealth Management, in a statement. “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.”

The report also cautions small business owners on the importance of diversifying their funds. About half (49%) of survey participants were not using options such as registered or non-registered investments to save for retirement.

“The importance of owning diversified retirement savings personally and outside of your business cannot be emphasized enough, given the risks and challenges in converting business assets into funds that can be used for your retirement,” the report states.

The study also gauges how survey participants feel they will leave their business, with the most popular option being selling to a buyer outside of their own family (36%). This is followed by 15% who would transfer the business at no cost to a family member, 12% who would wind down and close the business and 4% who would sell to a family member. One-third (33%) of survey participants were unsure of which option they would choose.

“Preparing to leave a business can be tough, especially because [business] owners have invested so much of their time, effort and money into [the business],” says Buttigieg. “A financial professional can help identify the best solution to ensure their business is left in the right hands and is valuated appropriately to possibly fund retirement.”

ValidateIt Technologies conducted the survey for BMO Wealth Management between June 27 and July 1. The online sample size was 405 Canadians small business owners between the ages of 25 and 64.

The full report is available through the bank’s website.

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