“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.
According to SBA.gov, 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.
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!
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.
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.