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Hi, business owners. Today I want to talk to you about retirement planning.
As a business owner, you don’t have access to a company sponsored 401(k) like employees typically do. You also don’t want to depend on your business as your sole source to fund your retirement. Many business owners think I’ll sell my business, then I’ll have all this money, but you can’t really control what the conditions will be like when you’re ready to sell. And finally, you want to have the peace of mind that, you know you’ll be financially secure and you’ll be able to step away from your business when you’re ready. So let’s talk about some things that you need to think about when you’re setting up a retirement plan.
First of all, do you want it to be for yourself or for yourself and your employees? Second of all, do you want to contribute to your employees? And do you want that to be a standard part of the plan or do you want that to be something optional that you do when you have the excess funds?
Do you want more simplicity or more flexibility? That’s a tradeoff you’re going to have to make.
And finally, how much do you think, roughly, you’re going to want to contribute for yourself? Those factors will influence the kind of plan that you’ll select and there are a lot of options.
So I would advise getting some help with plan selection. You will need some help with plan design as well.
Some other things to think about.
First of all, consistency is key. Some of these plans may not be able to tell you how much you can contribute for yourself each year until the end of the year, but I would highly encourage setting aside a little each month or each pay period for you to contribute then at the end of the year. Because that number might be a big number and for you to come up with $20,000 or $30,000 or $50,000 that you haven’t been setting aside may be a heavy lift.
Next, start early. Start as soon as you can. The longer you’re contributing and the longer that money is in there growing and compounding, the more you’ll have to fund your retirement at the end.
And finally, really take some care with this. Planning your retirement is just as important as planning your business’ future.
So if you have any questions, feel free to reach out and I’ll be back next week with a new Fiscal Fitness Tip of the Week.