Most contractors teeter on only one or two when it comes to retirement.

Nothing breaks my heart more than to see old plumbers doing backbreaking work at a time when they should be devoting their days to enjoying the grandkids and favorite pastimes. The physical work of plumbing is a young man's occupation, and even the business of contracting takes its toll on failing senses and nerves.

Yet, I've seen more than my share of guys in their 70s and 80s still hauling toilets and lavs up the stairs and trying to maneuver boilers and water heaters to the basement. A few may love what they're doing, although I suspect many of those who make that claim are merely rationalizing. When you see an old plumber or contractor, odds are you are looking at someone who continues to work because he has to, not because he wants to.

That's because our industry is sorely lacking in a retirement ethic. There's not one contractor out of 10 in our industry that has a reasonable plan in place to finance retirement for himself, and certainly not for employees. Talk about retirement plans with them - as I have done on hundreds of occasions - and you see a puzzled look in their eyes. They either haven't given it much thought, or the thought they've given fills them with dread.

The leading edge of the baby boom generation is only a few years away from drawing Social Security checks. Many of those who spent their careers in plumbing have bad backs and other physical scars as souvenirs. They deserve to spend their twilight years in comfort and without financial worries, but only a small percentage of them will.

For many it's too late. But for contractors with a few decades to go before retirement age, consider the following advice.

The Four-Legged Stool

It always amazes me how many people look forward to Social Security checks as their main source of retirement income. They tend to exaggerate in their own minds how much of an income SSI will provide, and underestimate what it will take to support themselves in retirement.

Social Security is a great program, but by itself is not capable of providing for a comfortable retirement, unless you choose to live in a Third World country. Social Security can make the difference between abject poverty and getting by, or between just getting by and enjoying a few creature comforts. But most people who rely on SSI alone find themselves living a bare bones existence.

SSI can be thought of as just one leg of a four-legged stool. Ever try to sit on a one-legged stool? It can be pretty darned clumsy and uncomfortable.

Some contractors have had the foresight to provide a second leg of the stool in the form of modest savings. These typically are "rainy day" funds that sit in bank accounts, treasury bills or other conservative financial instruments. At today's interest rates, you'd earn $1,000-$2,000 for every $100,000 you have invested in these accounts. Most contractors don't have even $100,000 saved up, so their savings can be expected to provide only a few hundred dollars in retirement income each year.

SSI and savings provide two legs of the four-legged stool. Ever try to sit on a two-legged stool? Not much better than trying to balance against a single leg.

Leg No. 3

What's missing for most contractors are the third and fourth legs of the stool. Leg No. 3 comes from a profit-sharing program or 401k-type account with regular contributions based on company profits.

Funding is not assured, and some years may contribute more than others, but over time, this really builds up. That's because of what I referred to in previous columns as the "8th Wonder of the World," the compounding of interest. Coupled with tax deferments until money is withdrawn, this pool of money becomes Olympic-sized by the time you use it.

With Leg No. 3, you can be more aggressive in your investments, especially when you are still many years away from retirement. Despite Wall Street's recent troubles, stocks are still the best bet at earning double-digit returns on your money over a long period of time. Yes, many stock investors wince in pain these days with each monthly broker's statement. But most of them made a killing during the 1990s, and are still well ahead of where they would have been had they spent the '90s sinking the same amount of money into bank savings.

PHC contractors with a profit-sharing plan are so rare as to be remarkable. Yet, those that offer such plans generally can look forward to a retirement filled with travel, golf, fishing, hunting or whatever other hobbies they may wish to pursue, whatever the expense.

Sitting on a three-legged stool is not so bad, is it? It may wobble a bit when you get off center, but for the most part it will hold you up.

Leg No. 4

The fourth leg of the stool is the sturdiest of all. It is also rare to encounter in our industry. Leg No. 4 consists of proceeds from the sale of your business. For some contractors that operate profitably and build a business capable of sustaining itself without the founder, this fourth leg represents a huge chunk of change, even running into seven figures. Not too shabby. Most of us could sit comfortably on that kind of four-legged stool.

Unfortunately, this leg represents fewer than 1 percent of the PHC companies doing business today. The last Construction Industry Census found about 85,000 PHC companies doing business in the country. (They only count companies reporting a payroll. That total doesn't include somewhere between 100,000-200,000 one-man shops and partnerships, few of which are saleable.)

I don't know how many of those 85,000 companies get sold every year for a significant amount of money, but I suspect it is far fewer than 850. The real number is probably only a few dozen.

I notice that business consultant and author Michael Gerber spoke at last October's PHCC Convention in Toronto. I hope PHCC members who attended take his message to heart. Gerber's "E-myth" books spell out forcefully what is the great fallacy of entrepreneurs - the belief that they are indispensable to their business.

Instead, the greatest task of any small business owner is to make himself dispensable. Only if you can create a business that can run without you will anyone be interested in spending considerable money to buy it. Think about it, why would anyone want to pay good money for a business so dependent on the owner that it's likely to fall apart when the owner leaves or loses interest in it?

That fourth leg is made of the sturdiest wood around, but it's so hard to find.