February 22, 2019 | By Mason Roberts
Small business owners tend to get sucked into the daily stress of their everyday lives, they fail to realize how important it is to be prepared for . The lack of preparation is what makes many small business entrepreneurs struggle when it comes time to retire. Also, if you have employees you are responsible for, it is important you are aware of a successful retirement plan.
How Do Small Business Owners Plan For Retirement?
Many small business owners find a source of income and a technical “retirement fund” when the time comes, selling their business for income that’ll last the last good years of their life, and paying themselves back in a way. While this can work for some, it can be a risky option, as it does not have the benefits a traditional retirement plan has, like room for the unexpected. An intelligent decision would be to start preparing for your future now; the earlier the better. Starting to plan while you are young, no matter the case is always the best idea for you to thrive. There are many things to be considered when planning for your future. Steps that should be taken include:
1.Find A Financial Advisor
A small business owner should search for an accountant who can help them understand the financial aspect of their business. A financial advisor will come in handy when putting together a retirement plan and help you decide what is best for your life, taking your personal expenses and small business into consideration. There are even financial advisors who are certified to help you plan for retirement, referred to as a “certified financial planner”. This is good to know because it means that whoever had certified them followed their careers, ensuring they are following the code of ethics that CFP’s are responsible for following. The main goal for certified financial advisors is to help plan for your future while keeping your present intact.
2. Start a Small Business Retirement Account
Starting a retirement account of your own will only help, no matter what the scenario. So it's a good idea to make sure not only your financial advisor is aware of your money situation, but you are as well! As a small business owner, opening a retirement account should not be difficult. It is much like a 401(k), which most larger businesses offer. In comparison to a small business retirement fund, it is likely referred to as a small-business-specific retirement plan.
With retirement plans, there are only so many that are specifically made for small businesses. If you are a small business owner, you should search out these plans to ensure you and your employees are being offered the best retirement plan for your special small business needs.
3. Open Your Own Retirement Account
The retirement account you use does not have to be specific to any type of business owners; but it can be an account of your own. With this, a viable option may be Roth IRA. Roth IRA is funded by your tax dollars, which are taken out, meaning once it is withdrawn there are no taxes to be taken out. The amount in this account is the cash you will receive, no matter what. The funds in the Roth IRA cannot be offered to employees in a small business. This is a viable option for single-person businesses and entrepreneurs.
4. Invest Smart
Having profitable investments is a factor that can really change your retirement fund plan for the better. This is another reason it's smart to take advantage of a financial advisor. They can assist you in deciding which investments are smart, and which ones will hurt you more than help. This makes your chances of increasing your funds from said investments higher, as the risk will get lower. There are also many different investment types that could be good choices to consider. Again, in this area, it's a smart idea to take this to your financial advisor and decide what is the best choice for you. And this could depend on many different areas. Successful investments depend upon different factors, especially when retirement plans are involved.
5. Come Up With An Exit Strategy
Needless to say, exit strategies are important to come up with. Many times, business owners do not have an exit strategy, making crucial decisions without much thought. But this is something that can cost you a great sum of money without even realizing. Conducting an exit strategy can help you sit on a nice, comfortable lump of cash in your later years. Selling your business in exchange for retirement funds is not a bad idea. If you're planning to sell your business, make sure it isn't a rash decision. Making a quick decision in this part of your life can cause you to settle for less money than you should, though you might not see it as a choice in the moment. As a small business owner, you should be able to sell your business for the best price, if planned correctly. Planning your exit strategy in advance can help you achieve this, making sure you don't bargain for less than you really deserve for all your hard work throughout the years.
So, What Does Your Retirement Look Like?
Many different small business owners have very different views on retirement. Some don't plan to retire at all, some didn't start a plan to retire early, and others are planning their retirements from the get-go. Whatever your dream retirement may look like, you should always be planning towards something. For many small business owners, retirement is years and years away; this may lead them to believe they have plenty of time to decide. But this mindset could negatively affect you and your small business by not giving yourself enough time to plan and save the money you worked so hard for your whole life to make. If you're a small business owner, you should plan for yourself because no one else will. Don't let your business legacy down because of neglectful planning! Decide whether or not you're actually going to retire, decide how to get the funds you need, and how to make it accessible to you later in your life. It's your future - plan it how you want it!