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Toronto hairstylist Anthony Avola started to prepare for his retirement years ago. Over a 40-year career, he sold off his interests in three hairstyling salons and, more than two decades ago, purchased what is now called the Avola College of Hairstyling & Esthetics, hoping to live off the income it all would provide.

But at 72, he still has scissors in his hands, working four days a week as an employee of an upscale salon he used to co-own.

"I work because I like it," Mr. Avola says. "But there's also the lifestyle issue. I need to work to maintain my lifestyle."

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He's not alone. Studies show that retirement is a more distant dream for many entrepreneurs than for others in the work force.

Nearly one in five - 19 per cent - of the self-employed believe they will be able to retire comfortably only at the age of 70 or beyond, according to an April survey by the Canadian Federation of Independent Business ( CFIB) of more than 7,800 respondents. Another 28 per cent don't see themselves leaving work behind until they are 65 to 69.

And entrepreneurs do tend to retire later than others: The average retirement age of the self-employed - (65 in 2008) - was three to five years higher than for employees in the private or public sectors, the study noted.

"In the older work force, there is a disproportionate number of older entrepreneurs," says Simon Parker, an associate professor of entrepreneurship at the University of Western Ontario's Richard Ivey School of Business, who has conducted studies in the United States and Britain that found that one in three workers among those aged 65 and up are entrepreneurs, compared to one in 10 in younger age groups.

"Part of the reason they continue to work is that, for them, work is fun. … They love what they are doing and are getting rewarded for it," Prof. Parker says. "They are their business, they're proud of it and they don't want to let it go."

But there's another crucial reason that they remain on the job: Too many are not financially ready for retirement, the experts say.

"We found that a lot of the self-employed don't bother to put money aside," says Prof. Parker, author of The Economics of Entrepreneurship. "People in their fifties who have no pension wealth will have to work in their sixties and seventies."

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Indeed, nearly half - 48 per cent - of respondents to the CFIB study said they did not believe they had sufficient disposable income to take advantage of retirement savings vehicles available to them.

Yet, more than a quarter say they will count on their registered retirement savings plans and a quarter on other investments to fund their retirements, according to a 2005 study by CIBC World Markets Inc.

For an even greater number - nearly a third - the sale of their business is expected to be a key source of retirement money, the CIBC study found. "The No. 1 source of retirement funding is selling the business, and having a succession plan in place," confirms Doug Bruce, vice-president of research for the CFIB.

But far too many of the self-employed have not yet figured out how they will leave their businesses behind. A lack of proper succession planning is a big concern, experts say.

In fact, just two in five small business owners have a clear plan for exiting their businesses, according to the CIBC study. And six in 10 aged 55 to 64 have not yet even started to discuss their exit plans with family or business partners, the study found.

"We know that lots of self-employed people go into their retirement years without well-prepared plans," Mr. Bruce says.

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"They can have the opinion that they can put off retirement planning because it won't take long. Then a health issue comes along and forces the issue. It's understandable because, in the early years, they are building a business, they have family and mortgages," he says.

Yet, planning is crucial - and it can never start too early, the pros say.

"I've seen the mess that can result from leaving planning till it's too late," says Andy Kovacs, a certified financial planner for Sun Life Financial Inc. "It's best to take care of the planning 10 to 15 years before you may want to retire. Waiting leaves your family, your business and your employees exposed."

Planning involves a whole host of issues, from investing wisely to tax planning to putting a succession plan in place. Mr. Bruce recommends having a team of specialists help entrepreneurs get financially ready to retire. "Many people have a team of accountants, lawyers, investment advisers, bankers, insurance people family and friends who have been helpful in coming up with a plan," he says.

Along the way, entrepreneurs need "to be very, very committed to putting money aside carefully," says Paul Woolford, a tax partner with KPMG Enterprise in Toronto.

And tax planning "is also an integral part of an entrepreneur's retirement planning," Mr. Woolford says.

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Beyond hiring advisers, entrepreneurs can also do some of their own legwork. For example, the CFIB offers on its site a guide to a succession plan.

Working longer does have its benefits, Prof. Parker says. "It's a common finding across all countries and all time periods that the self-employed are happier," he says. "Their attitude is work is fun and it's good for me. It looks like they are right from studies that I have seen. They seem to have longer, healthier lives."

Still "the worst thing an entrepreneur can do is not have a plan," Mr. Woolford stresses. "The entrepreneur doesn't have the safety net that an employee does."

Special to The Globe and Mail

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