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.
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?
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.
Here are four simple and popular retirement plan types for business owners to start investing in:
2. SIMPLE IRA
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.
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