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Planning for Retirement as a Small Business Owner

Planning For Retirement Requires Focus on Diversification

 

Are you a small business owner who has avoided planning for retirement? If so, you’re one of a third of respondents to a survey from Manta that said they do not have a plan in place for their retirement. Among those, 37 percent said they don’t have enough money to save for retirement. But, what’s really happening?

A number of small business owners say they’re not planning for retirement because they simply don’t make enough to open a retirement account. However, there really isn’t such a thing as “too little” to begin saving. The truth is, many small business owners are actually reinvesting in their own company instead of focusing on a retirement account. While this seems at first glance as a responsible action, it really puts the owner at risk.

Almost 20 percent of those surveyed by Manta said they’ve taken what retirement accounts they had and sunk them into their business. Doing this means the business owner is losing money due to taxes, penalties, and tax-deferred potential growth. It’s a risk that shows the owner has really invested in the growth of the business, but it comes at a high cost.

Of the survey’s respondents, 20 percent also said they don’t have retirement accounts because they plan to sell their business before retiring. However, what if the timing isn’t right? What about those business owners who had a long-term plan to retire in 2009? They are likely still working today, trying to recoup what they lost. The fact is, nobody really knows what the market will bring, so your best-laid plans can fall victim to unforeseen circumstances.

As a small business owner, here are a few important steps for you to take toward a solid retirement strategy:

·         Invest in a self-employed retirement plan, such as an individual 401(k), a SEP-IRA, or a SIMPLE IRA.

·         Create a plan for leaving the company. A succession plan can keep your business afloat in your absence, offering you a stable income.

·         Planning for retirement should include setting a tentative retirement date. Evaluate your lifestyle and talk to your investment advisor about how you can make a smooth exit that allows you to live comfortably in retirement.


Planning for retirement isn’t easy, especially when you’re passionate about your business and you want to see it succeed after you leave, or if you want to get what you feel it is worth when it’s time to sell. At Family Investment Center, we can help you navigate all the various decisions that have to be made. Contact us today and let’s begin planning for your retirement.

 

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