Small Business Retirement Plan – When and How

“Every beginning has an end”

Small business owners, after dedicating a lifetime to their business, are entitled to a hassle-free and comfortable retirement, which they often fail to work on, owing to several reasons. Despite understanding the pressing need of systematically planning for their retirement most small business owners are not seriously inclined towards it.

Small business owners must start thinking about retirement planning

According to, there are approximately 28.8 million small businesses in the USA out of which only a certain percentage have active retirement plans. This was demonstrated by The Kaufman Foundation report that revealed that more than half the small businesses are being initiated by baby boomers yet retirement planning is not on their agenda as their prime concern. The MANTA survey 2017 clearly showed that among the 1960 small business owners taken as case studies, only 66% had retirement savings plans.

What keeps small business owners away from retirement planning?

Managing a small business can be a full-time job for the owners until the ball of success gets rolling. Every intricate detail of the business calls for their attention until it is well- established. While raising their business like their babies, small business owners often forget to plan for the time when they would have to retire.

Time runs out and business owners often forget to plan their retirement properly

A recent study of 500 small business owners revealed that they had not drawn a personal salary from the business for several months so that they could put it back into the business. A large percentage of them even consider their business as their retirement.

When to begin planning for retirement?

“Plans are nothing; planning is everything” – Dwight D. Eisenhower

Experts estimate that ideal retirement savings for small business owners are at least 70% to 90% of their pre-retirement income. This retirement savings requires methodical and consistent planning. Small business owners are often well versed with numerous options available for them, but few choose to act.

Financial strategists assert that small business owners should begin contemplating on their retirement portfolio as soon as their business is over the initial setup phase otherwise strategically they will never be able to take out retirement savings from the business. Something else will always find priority!

start planning for retirement savings

How to plan for retirement?

Business owners who have been holding back on their retirement savings plan are usually skeptical about which retirement plan would be best for them and their employees, owing to costs and contribution limits. If you are one of them then you can discover an optimal retirement strategy by following the viable tips mentioned here:

Knowing your options: They should be well-versed with the retirement saving plans available. The plans facilitating retirement savings for small business owners are:

·        SIMPLE IRA

·        SEP IRA

·        Solo 401(k)

·        Roth IRA.

Legal heir or Successor: Small business owners should plan their legal heir or successor ahead of time. The assurance that their business would be taken care of by capable hands when they retire is also an important part of retirement planning.

Diversify Investment: Besides investing in retirement savings plans, small business owners should diversify their investment portfolio as part of their retirement savings strategy.

Diversifying Investment should be part of retirement strategy

Set the Date: Setting up a date to retire make retirement day more tangible. This allows the planning to start and move forward. It’s necessary for small business owners to set a date or else there is never a right time for the small business owner to retire.

If you are a small business owner and haven’t given a thought to retirement plans, well now is the time. Make your retirement planning a priority now to enjoy your golden years in peace.

If you are a small business looking for professional assistance with your retirement plan, contact the experts at FFPCT here and book a free consultation – FFPCT Business Finance Consultants.

Five Retirement Planning Tips for Business owners

The life of small business owners revolve around their business and their passionate involvement in it often leaves them preoccupied and casual about planning for the future  According to most small business owners, their business is their retirement plan.

In a survey conducted by Manta, it was revealed that more than one-third of small business owners do not have retirement plans whereas another wealth survey by the BMO concluded that the 75% of business owners who are trying to plan their retirement have only $100,000 or less saved for it.

Five Retirement Planning Tips for Business owners

How should retirement be planned?

“Planning is bringing the future into the present so that you could do something about it now” – Alan Lakein

The first thing to clearly understand is that your business is not your retirement plan. Small business owners can work on several strategies to enable a smooth retirement.  The most feasible and easy tips adopted by the entrepreneurs could include:

Plan on future living expenses

Planning for retirement can begin by some simple calculations. The calculations should be about the future living expenses of the business owners when they are no longer working. The questions they need to answer are how much they will need to live comfortably and how will they meet that requirement when they retire? Will they have saved enough until then?

When planning your retirement Plan on future living expenses

Engage the skills of a financial planner

Financial planners are proficient at understanding the financial situation of a business and draw up a plan accordingly. By engaging the services of a financial advisor, small business owners can formulate plans for their present as well as their future.

Invest in retirement plans

The small business owner can begin by investing small chunks of money into retirement plans. The benefits are two-fold. One, it reduces tax burden for the present, and two it helps grow tax-deferred for future, until it’s time to retire.

Small business owners Should start investing money into retirement plans

Here are four simple and popular retirement plan types for business owners to start investing in:



3. Solo 401(k)

4. SIMPLE 401(k).

Diversify investment portfolio

Other than investing in the retirement plans, small business owners also have the option to invest funds in low-risk investment schemes such as investing in the stock or the bond markets. This shall not only diversify their investment portfolio but will also enable them to withdraw funds when the time is appropriate i.e. at the time of retirement.

Diversify investment to protect your retirement plan

Plan a business exit strategy

A well-planned business exit strategy can help small business owners to derive maximum remunerative returns from their businesses when it is time to retire or pass on the business as a legacy. Without a well-planned business exit strategy, the business owner may have sell their business short or make last-minute decisions that may not be as lucrative.

Small business owners should not procrastinate their retirement planning for it is only through their present efforts that they can safeguard their future. If you need professional assistance to start planning your retirement contact the experts at FFPCT and book a free consultation:
FFPCT Business Finance Consultants

How to Plan for Retirement as a Small Business Owner

Take control of your retirement just like you take control of your business every day!

We all know that saving for retirement is pretty important. When you’re a salaried employee working for a company, you typically sign up for their retirement plan and that’s that. However, if you’re the owner of a small business you do not have the luxury of just signing up for whatever plan your company has to offer, because you ARE the company! You have to figure out a way to save for retirement on your own in this case.

A surprising number of small business owners are not adequately preparing for their future retirement. If you own a small business, it’s critical that you establish some sort of retirement savings plan, so here are a few ways to get started.

By Maurie Backman

1. Create a retirement budget
Though it’s not always easy to predict how much you’ll wind up spending in retirement, the sooner you get a sense of how much income you’ll need to stay afloat, the more accurate a goal you’ll have to work toward. Since you’re self-employed, your business might be offsetting some of your existing living costs. For example, you might currently be leasing your personal car for your business, or taking a home-office deduction if you conduct business out of the house. But these benefits won’t be available once you’re no longer generating an income, so keep them in mind as you attempt to map out your future budget.

2. Find the right retirement savings plan
Small business owners have several options when it comes to saving for retirement — options that salaried workers don’t have access to. The first one you might consider is the solo 401(k), which works just like a regular 401(k), only with one added benefit — the ability to contribute up to 25% of your business earnings for a total annual limit of $54,000 if you’re under 50, or $60,000 if you’re 50 or older. Like a regular 401(k), solo 401(k) contributions are tax-deductible unless you opt for a Roth account, in which case you’ll pay taxes now, but enjoy tax-free withdrawals in retirement.

Then there’s the SIMPLE IRA, which, if you’re self-employed, allows you to contribute up to $12,500 per year if you’re under 50, or $15,500 per year if you’re 50 or older. Furthermore, with a SIMPLE IRA, employers must make contributions on behalf of participating workers, either by matching employee contributions up to a maximum of 3% of salary, or contributing 2% of employees’ salaries up to a maximum of $5,400. If you don’t have many (or any) employees, a SIMPLE IRA could be an effective means of saving for retirement, but if you have a large number of people who work for you, it could get expensive.

Finally, there’s the SEP IRA, which, if you’re self-employed, lets you contribute up to 25% of your net business income per year, up to a maximum of $54,000. The one drawback to the SEP is that, as a small business owner, you’re required to contribute the same amount to your employees’ accounts as you do to your own. But if you don’t have any employees and want to save in an IRA, you’ll get more flexibility with a SEP than you will with a SIMPLE.

3. Ramp up your savings rate
Once you figure out where you’re going to put your money, your next move is to work on increasing your savings rate to give your nest egg a decent amount of time to grow. Even if you start out with relatively small contributions, by steadily increasing the amount you put into your savings plan, you’ll have a good chance to make up for lost time — especially if you’re eventually able to max out a plan with a generous limit to begin with, like a Solo 401(k), or a SEP IRA.

Of course, the challenge many small-business owners face in saving for retirement is that they prefer to reinvest their earnings in their companies rather than set that money aside for the future — so you’ll need to work on striking a balance. That might involve pumping more cash into your business during its early years to build it up, and then boosting your retirement savings rate once your company is well established. Or it might mean taking advantage of years with better profits and socking away the difference for the future.

If you’re a small business owner, it’s critical to take retirement planning into your own hands. The sooner you begin focusing on the future, the better equipped you’ll be to make smart decisions for yourself and your business in the present.

Read the full article here.

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