5 Ways to Start Saving for Retirement as a Business Owner

5 Ways to Start Saving for Retirement as a Business Owner

As a business owner, you put your blood, sweat and tears into your company. While you were pouring your profits back into the business, you probably forgot to think about retirement. But it will be here before you know it. If you haven’t already, it’s time to start saving for retirement. Here’s how:

1. Create a Plan

Create a plan to start saving, and start with a goal. How much will you need to live in retirement? Where do you envision yourself retiring? Do you want to travel the world, or live a modest life in a tiny cottage?

If you hope to live comfortably, you cannot rely on Social Security or survivors’ benefits if your spouse passes away.

If you’re unsure of how to calculate the cost, there are online calculators and worksheets that can help you understand your future expenses.

Once you understand where you want to retire and how much you will need, you can create a plan to reach that goal. Additionally, you can start developing a succession plan to pass on your business in retirement or after your demise.

2. Work with a Financial Planner

A financial planner can help you devise a saving strategy and reach your goals for retirement. Ideally, you should work with a Certified Financial Planner (CFP).

A financial planner will help walk you through the plans available and identify the one that is most financially viable.

If you’re creating a succession plan, you may need to involve some experts to help you reach your business goals.

3. Invest in a Diversified Retirement Savings Plan

Establish a diversified retirement savings plan to get a jumpstart on your savings. You don’t necessarily have to throw all of your money into the plan, but these funds will help reduce your tax bill now and continue to grow – tax-deferred – until you start making withdrawals when you retire.

There are four main options:

  • Solo 401(k)
  • SIMPLE 401(k)

All of these options, with the exception of the SEP-IRAs, are available to sole proprietorships, corporations, partnerships and limited liability companies.

SEP-IRAs are a good option if you’re the only employee in the business. With a SEP-IRA, you can contribute up to 25% of your net income each year and enjoy some tax savings.

4. Purchase Income-Producing Assets

A retirement savings account is the most common way to save for retirement, but you can also increase your savings by investing in income-producing assets.

Purchasing rental units, for example, can provide annual cash flow that can be set aside for retirement. Other income-producing assets include:

  • Farmland
  • Timberland
  • Vacation rentals
  • Franchises
  • Royalties
  • Peer-to-peer lending
  • Dividend paying stocks
  • Interest paying bonds
  • Certificate of deposits

5. Automate Your Contributions

It’s easy to forget or overlook your savings if you plan to make quarterly or yearly contributions. Other business expenses may take priority, which will ultimately hurt your retirement savings. The longer you put retirement on the back burner, the less money you will have when you finally decide to hang up your hat.

Automating the process and making monthly contributions will ensure that your retirement is a priority.