Understandably, most small business owners ignore retirement planning to focus on their growing company, but this sets you up for failure later on. Here’s how small business owners can prepare for retirement to prevent you from working into your 70s and 80s.
Develop an Exit Strategy
If you, like many other small business owners, have a company that relies on you to function and thrive, you must determine what will happen when you retire. You may decide that the business should stay in the family, or you could sell the company to another owner.
Whatever you decide, ensure that your plan allows for some flexibility. Health issues and other considerations could speed up the process and demand you get out sooner than you were thinking.
Make Low-Risk Investments
Everyone knows that the safest investments are those you make for the long term. Invest across stock markets (like the whole U.S. stock market), and put your money into low-cost index funds to keep your risk low. Consider hiring a financial advisor and discussing investment options with them to develop the best strategy.
Consider Retirement Plan Options
There are two tried-and-true retirement plans for small businesses, and you should become intimately familiar with what both options offer. The SEP IRA could work for you if your business is just you or if you don’t have many employees. It’s easy to set up, simple to maintain, and comes with no ongoing maintenance fees.
You can also consider a self-employed 401(k), also known as a Solo 401(k). As the name suggests, this plan works best for a self-employed business owner with no common-law employees. The Solo 401(k) lets you contribute up to $55,000 a year to the plan—a particularly generous contribution limit.
Now that you know how small business owners can prepare for retirement, start making a plan that will keep you away from conference rooms when you should be enjoying some well-earned relaxation time.