When you’re running a startup business, it can be a challenge to create a five-year plan, let alone a retirement plan. Some days it probably feels like you might not be able to pay all of your bills at the end of the month, so how can you even start to think about setting money aside for abstract future decades down the road?
A lack of retirement planning is a challenge many entrepreneurs face and, unfortunately, putting it on the backburner for too long can have serious consequences down the road. It’s your actions now that will impact your ability to retire in your senior years, so set aside some time today to think about what’s to come. Here are a few things to consider when planning for retirement as an entrepreneur.
Work toward a reverse mortgage
Financial security is a necessity when you retire but one that can be difficult to attain. Taking out a mortgage on your home is one way to temporarily get extra money, but the consequence is partial ongoing repayments you have to make beginning almost immediately. A reverse mortgage is a type of long-term home loan you can only qualify for when you are 62 or older.
The amount you can borrow is determined using a reverse mortgage calculator. Then you will receive the money to do with what you wish. For as long as you maintain residency in your home and pay for its expenses, such as taxes, the loan balance will not be owed back to the lender. Therefore, you will be free to relax during your retirement without financial worries.
As an entrepreneur looking down the road, you should be working toward getting as much equity in your home as possible. Set aside money to make an extra mortgage payment annually. Avoid taking equity from the home to pay for your business. If you can’t commit to a separate savings plan, then work as hard as you can to build your equity while building your business.
Automate your savings
It can be a challenge to see money in your bank account and not allocate it somewhere without considering transferring it to a savings fund. However, if you’re looking at contributing $50 each month to savings, you might not notice its absence if you never notice it arrived in the first place. Set up your banking to automatically withdraw a predetermined amount monthly, preferably on the day it enters your account.
Use a savings account that you can’t readily transfer money from online. A registered retirement savings plan or investment account are a few options for this task. If you truly need the money, you will have to schedule an appointment to get it from the bank and may have to wait a few days for the transaction to clear.
Consult with a financial advisor
Don’t hesitate to reach out to the experts to see what approach to retirement planning would be best for you, based on your business expectations. They may be able to offer solutions that aren’t apparent as you search online, based on industry loopholes and qualifications specific to your needs.
Working with a consultant will also give you the benefit of a clear action plan, and delegating legwork instead of spending your precious time trying to determine a path to retirement. After all, people come to you for help with your line of work, why wouldn’t you do the same when looking for information outside your frame of knowledge?
Every little bit counts
When it comes to savings, every little bit counts. Setting aside as little as $50 each month over the next 25 years will create a nice little nest egg of $15,000 before interest. It may not be enough to retire on, but it’s better than nothing at all.
Create a flexible budget that will allow you to contribute more during times of success, and less during times when money is tight. Think twice before making purchases. Will you see a return on investment? Is the luxury worth what you will have to sacrifice in other areas? Think critically and take baby steps.
It’s never too early to start planning for retirement. Someday all your hard work will pay off, and you can live out your golden years in relaxation!