Planning for retirement can often seem like a daunting task, even when you have employer-backed resources such as 401(k)s. When you run your own small business, thinking about your personal financial future can seem all but impossible, and in fact, we meet many entrepreneurs who are tragically unprepared to one day retire.
It does not have to be this way. Small business owners can plan for retirement like anyone else can, and we advise them to do so in conjunction with a seasoned financial planner—someone who can provide insight into the various small business retirement products that are out there.
Starting Your Retirement Planning
For small business owners who are overwhelmed by the retirement planning options out there—or insecure about their retirement plans—we recommend a few quick tips.
Think about the end. One of the best ways to think about your retirement is to skip ahead to the end, and set a goal for how your career will close out. Will you sell the company? Will you simply close it down but sell off the equipment? Will you pass it down to a family member or a colleague? Determine your ultimate goal now, because it will determine your retirement strategy.
Create a retirement savings plan. This is where you will need to meet with an advisor to discuss the different account types that are available to you, and to set a basic goal for how much you will need to save. This goal will be determined by the retirement lifestyle you want, the retirement age you set, and—if you’re going to sell the company to help fund your retirement—a realistic appraisal of its likely market value.
Develop the business. Most small business owners are identified as sole proprietors—but the problem is, you cannot sell a sole proprietorship. To eventually use the company as leverage for your own retirement, then, you will need to grow it—add clients, but also add employees. Growing your business is ultimately a way to grow your own retirement options.
Use your business capital wisely. In keeping with the last point, make sure you’re smart in the way you grow your business—scaling strategically, being judicious in how you use small business loans, and always keeping your retirement goals in mind. Your personal future is very much tied up in the business’ future, so always proceed with caution.
To learn more about retirement planning resources for small business owners, we invite you to call the Stonepath Wealth Management team today.