It’s very easy for an entrepreneur or small business owner to get caught up in the daily grind of running their business so much so that they aren’t able to prepare adequately for the future.
After all, how many entrepreneurs routinely skip important health check-ups, neglect proper rest and diet, or find it difficult to spend quality time with their families? All these sacrifices come from the desire to make the best life for themselves and their families. The only problem is that in “survival mode,” they end up neglecting things that are important to their well-being—including planning for retirement.
- Small business owners (SBOs) are confident about their retirement plans, yet savings rates are down.
- The majority (62%) of SBOs say they’re confident they’re saving enough for retirement.
- Yet nearly half (47%) of SBOs are saving less than 10% of their income and one-quarter aren’t saving at all.
- Many SBOs are saving less than they did four years ago—47% have saved a nest egg of more than $100,000, compared to 59% who saved at least that amount in 2013.
The good news is that there are more options for retirement saving than ever. You can lean on the latest technology to help you simplify steps and automate your savings. You can go the traditional route and simply move money into a retirement account. Or you can take your retirement-saving efforts even further with strategies like capitalizing on income-producing assets such as real-estate or business holdings.
Let’s take a look at real life entrepreneurs who are facing the challenges of a busy life yet still making a way to save for their golden years. Hopefully, you’ll be inspired and perhaps even pick up some great ideas around how you can start saving for retirement as a busy entrepreneur as well.
Angela W. McIlveen and her husband own a family law practice. McIlveen describes automation as great help for saving for retirement: “We have found the best way to save for retirement is to contribute to a 401(k) plan every month. Initially, we tried contributing quarterly or yearly, but often other business expenses took priority. By contributing every month, we know that we are saving for our future. “
Having an Exit Strategy
Jim Salmon, VP of business services for Navy Federal Credit Union, says entrepreneurs need to be strategic about selling their businesses when they are ready to retire. “Always have a plan—even from the birth of the business, there should always be a way out,” he says. “Don’t start thinking about the future of your business the same year you turn 65! When you’re ready to retire, look to sell your company rather than completely shut its doors. “
Entrepreneurs can access a number of retirement savings vehicles specifically for them, such as SEP IRAs and Solo 401(k)s. Each type of account has its own tax benefits and contribution limits.
Eric Huhn of Milwaukee, Wisconsin, owns a digital marketing business called Kinetic Sequence. He consulted with his CPA who recommended that he use a SEP (simplified employee pension plan) IRA. He chose this option because it is fairly easy to start and manage.
Huhn can contribute up to 25% of his net income to his SEP IRA each year and realize some tax savings. Another benefit of the SEP IRA: It’s very accessible for even the busiest of entrepreneurs. Eric can log in to his online brokerage to manage this account and monitor his savings progress.
Heather Schooler, owner of The Money Library, likes the Solo 401(k) because as an entrepreneur with a corporation, she has more options to diversify her investments. She likes the fact that she can make non-traditional investments such as buying gold or making loans to small businesses versus just investing in the stock market.
Buy Income-Producing Assets
Jennifer Beadles, president of REI Millionaire, uses a self-directed 401(k) to invest in peer-to-peer lending platforms, sometimes with yields of up to 9%-10%.
Beadles also has another strategy many entrepreneurs use to pad their retirement nest egg. “I currently own 18 rental units that provide $106,000 in annual cash flow, which will provide me with income when I retire,” she says. It’s taken her 10 years to build her real-estate empire, which began when she started acquiring property at age 21.
Offer Your Employees Retirement Benefits
If you’re a small business owner with a team, consider providing retirement savings plans to your employees. There’s strong evidence that extending retirement benefits in a small business can help with recruitment, retention, and the bottom line in many ways.
Here’s more on what Capital One found out about retirement benefits in small business settings with real entrepreneurs:
- 94% of SBOs who offer a 401(k) say it drives recruitment and retention, 50% report it helps attract better quality employees, and 47% say it inspires increased employee engagement.
- 27% of SBOs who offer a 401(k) say employee demand played a role in establishing a plan (up 7 percentage points from 2013).
- 48% of SBOs with 2-50 employees say departing employees cited a lack of retirement benefits influenced their decision to leave.
- A third of SBOs with a 401(k) say it has reduced personal taxes (35%) and business taxes (31%).
So, as you can see, adding retirement benefits to the mix is in the best of almost any small business’ interest.
AJ Saleem, founder of Suprex Learning, is in the startup phase and putting most of his effort into expanding his business for now. Saleem adds, “My goal is that when my company becomes profitable, we are able to offer 401(k) plans to employees, including myself.”
Megan Driscoll, founder and CEO of PR firm EvolveMKD, says that she has prioritized retirement saving for both herself and her employees. Her program matches up to 5% of contributions. “I just told all the women on my staff that not taking advantage of the 401(k) match was like them saying ‘no’ to a raise I was offering,” she says. “I believe you should take advantage of any and every program an employer offers that provides ‘free’ money.”
Hopefully, these stories of real entrepreneurs and business owners making strides to plan and save for retirement inspire you to make similar moves. Even if your moves seem tiny at the moment, the earlier you get going, the better. Sometimes, the most difficult part is getting started. Your future successful, retired self will thank you!
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