You’ve worked so hard to get your new small business up and running. There will always be a million things that need to be done when you’re the owner of a small business, but don’t neglect yourself, your retirement, or your future!
I have seen business owners pour their heart and soul into creating their company but get so caught up in the day-to-day that they never sit down and think about retirement.
Take time now to start planning for your retirement!
According to this survey, 34% of entrepreneurs have no retirement savings. Many of the individuals are hoping to sell the business as their “retirement plan.” Selling your business can definitely be lucrative and should be factored into your succession planning, but it should not be your only method of saving for retirement.
In the meantime, while you’re working, you should still try to put some of your income aside into a retirement savings vehicle. There are a few simple options that can be set up at most major investment firms that do not take a lot of paperwork to fill out and follow standardized contribution rules that are easy to understand.
SEP IRA stands for Simplified Employee Pension Individual Retirement Account. For employee contributions, the limits are the same as with a traditional IRA. However, this type of account allows the Employer to make contributions as well, and can increase the amount you’re allowed to put towards retirement each year. This type of account works best for companies that have either one or very few employees.
SIMPLE IRA stands for Savings Incentive Match PLan for Employees. This type of plan works well for slightly larger companies. A business is allowed to have up to 100 employees with this type of plan. The rules are pretty straightforward and standardized, but the downside to this plan is that employers are required to contribute for all employees, whether or not they make their own contributions to the plan.
Sometimes called a Solo 401(k), this type of plan is only available to business owners who are the only employees and their spouses. It has the largest contribution limits of any of the three options and operates very much like a 401(k) you may be familiar with from your corporate years, but if you ever hire another employee, you will not be able to contribute any longer.
So How Do I Choose?
A full third of small business owners don’t have retirement savings! Of those, 18% of those surveyed quoted that they expect to sell their business to fund their retirement. You might need to start planning a less risky route.
As a business owner, there is no doubt you are passionate about what you do. However, you may not have the same passionate feelings about saving for retirement. Good news – we do!
Here at Better Money Decisions, we love to talk to small business owners about which plan might work best for their situation. It’s so much easier to start putting a little aside now and letting it grow over time, than waiting until it’s too late and scrambling to make a plan.
Contact us for a complimentary introductory consultation where we can get to know you a little better and get you on the path to saving!