Saving for Retirement When Running a Small Business
Are you a small business owner? If so, are you ready for retirement? Whether you are only thirty years old or if you are fifty, retirement should be on your mind. Small business owners are 100% in charge of their retirement. If you donít start acting now, you may find it difficult to stop working and retire in a timely matter. As previously stated, you will want to get started with saving for retirement as early as possible. Small business owners are encouraged to start planning for retirement in their thirties or even earlier. Why? Because setting up retirement savings accounts, such as an Individual Retirement Account (IRA) can be harder for small business owners.
Often times, more paperwork is needed and extra verification is often required. For that reason, the earlier you start, the better your financial situation will look when it comes time to retire. One step that you will not want to take involves relying on the sale of your business. Unfortunately, this is where many small business owners find themselves in trouble. Many believe that they can sell their business and live off the profits.
Yes, this may happen, but you may be surprised to learn how slim the chances are. Even if your business turns a nice profit, you still may not have any buyers. Many entrepreneurs like to start their own businesses from the ground up and not everyone has the funds needed to purchase a profitable and well-established business, like yours. Since you are encouraged to not rely on the sale of your business for retirement, you may want to refrain from selling. How many employees do you have? If you have one or more employees, can you work with and train someone to take over your position? If so, you can retire and still collect profits from your business. If you must hire an employee to replace the worker you promoted, your profits may slightly decrease, but you should still have enough to survive throughout your retirement. If worse comes to worse, you can always return to work. As a reminder, no matter how successful your business is, you should not rely on it as your only source of income during your retirement years. That is why you should also examine popular retirement saving accounts. Aside from a traditional savings account that you deposit extra business profits into, you should examine 401(k) programs.
Unfortunately, many small business owners do not know that they exist for them. They do. A Single Participant 401(k), also commonly referred to as a Solo 401(k), may be perfect for you. They enable business owners who donít have employees to save money for retirement. Higher contributions are also allowed. When it comes to creating a Single Participant 401(k) or a Solo 401(k), you may want to speak to a financial advisor. This is because companies that offer these types of plans and programs can be difficult to find. They are out there, but you may need help finding them. Also, consulting with a financial advisor cannot do you any harm. In fact, you may learn additional tips and techniques for saving for retirement as a small business owner.
Speaking of additional tips, it is important to not put all of your eggs in one basket. As previously stated, do not rely on your business to get you through retirement. Also, do not rely just on a 401(k) plan. Depending on your contributions, such as how often you paid your taxes, you should also qualify for social security benefits. You can estimate your benefits by contacting the United States Social Security Department, but still donít rely on it. On average, it only covers about 30% to 40% of income needed during retirements. To stretch your money to its fullest extent and to properly and safely prepare for retirement, examine 401(k)s for small business owners, SEP-IRAs, SIMPLE IRAs, stocks, and bonds. In the event that one of your options does not pan out, you still have savings to fall back on. PPPPP Word Count 671 .