Running a small business is a dream come true for many people. People love the idea of being their own boss and making choices about the kind of work they want to do in life. At the same time, the process of creating a good business that works out can take a lot of time and effort. It requires a great many skills to make it all work.
A business person must be particularly aware of the best ways to manage all of the forms of income as they operate their business. This includes paying their current bills and making plans for their eventual retirement. Managing these goals can take a lot of attention to detail but it must be done. As a business owner, you are the person in charge of your financial destiny. Fortunately, you have lots of allies in the tax system as you plan for this process.
Know the Numbers
The first thing you want to do is get a feel for the numbers you need. You need to know when you plan to retire, how much you need for retirement, and the likely living costs you’ll face once you’re there. If your business is doing well and you’re earning a lot of money, you might be ready to retire early. In that case, you’ll need to work even more closely on the funds you need to retire right now. You might find the numbers are larger than you thought. If that’s true, you might need to put off your retirement until you’re on firmer financial footing.
As a business owner, you have to show off many skills and areas of expertise to create a successful concern. At the same time, you can’t be an expert in every single part of the economy. That’s why it can be very helpful to work with a financial expert who has the know-how you need to get to retirement. A fiscal specialist can help you figure out the right way to save money for your retirement.
Professionals with a Certified Financial Planner designation have been trained to help those with all kinds of financial situations including small business owners. If you’re just starting out, they’ll help you develop a plan to make it work from the beginning. If you already have a small business, they can create a plan to tweak your existing retirement plans for your current circumstances and beyond.
Know Your Options
Like everyone else, as a business owner, you have certain retirement options. In general, there are four different potential retirement plans that you should know about as you run your own business.
An annuity is insurance contract that provide a fixed income stream for a person’s lifetime or a specified period of time.
The SEP-IRA is like the standard IRA. You can contribute up to a set amount of money to an account that has tax benefits when you use it. You can put thousands of dollars in the account each year.
The Simple IRA is best for the small business owner with a hundred employees or less on the payroll. All contributions are from pre-tax dollars and come from the employee’s paychecks. They’re a good way to help your employees retire. You can also contribute to your own IRA.
The Solo 401(k) is a great choice for the business solo business owner. If you have no employees you can contribute up to a quarter of your salary up to as much as $53,000 a year.
The Simple 401(k) is like the simple IRA in that it is intended for the employer with one hundred employees or less. Keep in mind this form of retirement has lower caps than the solo 401(k).
Make It Simple
Investing for retirement doesn’t have to be complicated to work out in the long term. Many people find it useful to stick to standard investment vehicles such as an index fund. Index funds are designed to mirror the average performance of the market as a whole.
Aim for diversity by investing in varied types of index funds such as one that targets the foreign markets and the American bond market. You can also go for a mixture of growth stocks and stocks that offer a dividend. As a small business owner, it helps to have many sources of income in retirement. Consider buying real estate like a few rental apartments in order to generate rental income that can supplement your overall retirement funds.
Retirement Plans for Small Business Owners
Many 401(k) providers have specific programs aimed at the needs of small business owners. Working with a company that knows what it takes to run a small business and plan for retirement at the same time is an ideal way to get where you want to be when you want to retire. They can design a plan for you, your spouse and your employees. They can also help make sure you’re taking advantage of all available tax breaks.
Your small business is yours to appreciate. A good business retirement plan lets you leave it on your own terms.