Americans are most vulnerable to falling behind in saving for retirement, especially small business owners. Entrepreneurs with excess cash should invest in their business instead of saving for retirement. Covid was not helpful.

Amid the pandemic, scores of America’s small business owners stopped or cut back on their retirement savings, according to investment professionals and retirement experts, squeezed by rising labor and raw material costs, or in the worst-case scenario, facing business closures.

The small-business pandemic has not had a major impact on their retirement planning. A March survey conducted by ShareBuilder of 500 small-business owners found that 37 percent don’t believe they have enough saved for retirement. However, this is still a significant drop from the 44% that said they didn’t have enough retirement savings two years prior.

Data shows that small-business owners’ savings rates were similar to the rise in all Americans due to the pandemic. Guideline’s retirement platform for small-business owners, $646, showed that the average monthly contribution to their Guideline 401(k), was $646. The company reported that this number rose to $783 per month in 2021. For its part, Vanguard saw participation rates among small businesses rise to 73% in 2020 from 72% a year earlier, and deferral rates — the portion of an employee’s wages contributed to retirement — increase to 7.3% in 2020, up from 7.1% in 2019.

But these outcomes generally don’t reflect the experiences of many of the country’s smallest businesses — including those in particularly hard-hit industries. Financial professionals say many of these small businesses are behind on their retirement savings plans in recent years. Coupled with the fact that many owners were never saving for retirement, the recent market gyrations could make it a good time to consider socking away money, or more money, for retirement. 

We have some suggestions on closing the gap.

1. You can save at least 10% on your income for retirement.

Generally, investing experts suggest saving 10% to 15% of your earnings annually over a 40-year-career — just to maintain the same standard of living at retirement, said Stuart Robertson, CEO of ShareBuilder 401k. The March survey revealed that 38% of respondents were not saving more than 10%. 24% of respondents said that they did not contribute at the moment.

2. Reduce your spending and invest in savings

David Peters, founder and owner of Peters Tax Preparation & Consulting in Richmond, Va., has been telling business owners to take a hard look at their budget, paying close attention to where they are spending their money and searching for ways to cut. They might even be able work from home, saving gas and cutting unnecessary luxury goods. He said, “It would be smart to reduce some current expenses to continue saving for long-term goals.”

3. Increase investment portfolio risk

For those who are already saving money, another option is to increase your investment risk while cutting back on spending. Timothy Speiss is a tax partner at EisnerAmper LLP and he said, “If your allocation was increased so that you are getting two to three percentages higher on a return rate, and your spending decreases by 2% or 3%, then it could be very powerful for returns.”

This may sound like an unpleasant truth given recent volatility in the market, but small-business owners who have enough cash may be able take advantage of funds that are underpriced. Peters stated that people are afraid to save because they see red numbers every day. However, the market swings can open up opportunities that they might not otherwise be able to take advantage of.

Dan Wiener runs Vanguard Investors’ Independent Adviser. recently told CNBC’s Bob Pisani, when the S&P 500 falls more than 3.5% on a single day or series of days, they are more often than not buying opportunities. This occurred 65 times between June 1983 and March 2022 and resulted in average returns of 25.6% for the following year. According to him, “Buying in on large price falls has proved profitable more frequently than most if you are willing to wait just one year.”  

4. Make a plan, and follow it

While some small business owners may be concerned the market will fall further, retirement savings professionals said that things tend to even out over time when owners contribute regularly to their retirement. You shouldn’t choose the best day of your life, the underlying motivation should be to plan for long-term savings and to stick with it.

By just contributing regularly, investors get the benefits of dollar-cost-averaging, meaning you’re not always buying at a high or a low, said Kevin Busque, CEO and co-founder of Guideline. You don’t need to be concerned about the timing of the market when you can set it and forget.

Robertson gives the example of an investor who buys funds for $500 in high, low, and recovering markets. An investor purchases five shares of the fund at $100 each. Next, the investor buys five shares at $100 each. Finally, he then acquires 10, 50-cent shares, and finally, 6.67 shares worth $75 each. He spent approximately $1,500 and purchased 75 shares at $75 each. He’s still ahead, even though he purchased some shares at market highs and lows.

Robertson stated, “They have the ability to save in any way that suits them; what matters is that they do it.”