MARCH 22, 2012Seven years before Donna Hopson planned to retire, the small-business owner mustered the courage to develop a concrete financial plan for retirement.

“Even though I ran a retirement planning consulting company and was saving, I hadn’t figured out exactly how much money I needed to retire,” says Hopson, who is based in Southern California. “I had a great awakening when I did the math, discovering that I needed to save 300 percent more each year in order to retire when I wanted.”

Hopson buckled down and made the contributions, which amounted to $30,000 to $50,000 annually, and retired four years ago. “Calculating exactly how much I needed to retire was absolutely essential,” she says.

Retirement planning discrepancies

Though women are concerned about retirement, a study on women business owners and retirement planning

conducted by the American College’s State Farm Center for Women & Financial Services shows that those concerns are not a top priority, says certified financial planner Mary Quist-Newins, director of the State Farm Center for Women & Financial Services.

“While an overwhelming majority (84 percent) of female business owners in the study were concerned about retirement, only 25 percent had retirement plans in place such as SEP IRAs and 401Ks,” says Quist-Newins. “And when it came to planning and estimating how much they were going to need, a full one-third hadn’t attempted those calculations.”

Similarly, only 10 percent of women business owners worried about not having a solid plan in place and just 23 percent were concerned about the possibility of having to continue working into retirement in order to make ends meet, according to the study.

“Every study shows that the biggest mistake women make when it comes to retirement planning is not figuring out how much they need,” says Cindy Hounsell, President of the Women’s Institute for a Secure Retirement (WISER)

. Hounsell started the nonprofit, which educates women on retirement planning, 16 years ago after working for a government-funded women’s pension project.“Women called in during the project with heart-wrenching stories of having lost pensions and living on very little,” she says. “It became apparent to me that the sooner women take stock of their retirement financial needs, the better. Doing so is a lot like getting on the scale. It can be intimidating, but it gives you the information you need to make changes.”

Paradigm shift

“For women entrepreneurs, the real fun in owning a business is making it grow,” says Hopson. “It’s natural to focus on developing the business. Shifting to the phase of making the business as profitable as possible so you can save for your exit takes a complete change in mindset, but it’s necessary. If you don’t plan for retirement, years pass by and you can’t get them back.”

Making retirement planning a top priority can actually be easier for female entrepreneurs, who are accustomed to analyzing income and expenses and cash flow, notes Quist-Newins.

“Once you know what you need financially to retire, you can determine the feasibility of saving what you require within the time-frame,” she says. “If your goal is not possible, you can delay your retirement date or reduce your planned living expenses.”

Depending on your business and its marketability, you may also be able to add the sale of your business to your retirement portfolio. Hopson lived off the proceeds from the sale of her business for the last four years and is only now dipping into savings.

“Selling the business at a profit and saving enough to retire took planning,” says Hopson. “The fairy godmother of retirement is not going to wave her magic wand. You’ve got to make the calculations, set your goals and then meet them.”

A freelancer since 1985, Julie Bawden-Davis has written for many publications, including Entrepreneur, Better Homes & Gardens and Family Circle. Julie blogs via Contently.com

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