Planning for your retirement is a little different when you own a small business because there are more issues that can affect your ability to build the wealth you’ll need. While it may be a more complex and require strategic planning, you can retire on time with the resources you’ll need to enjoy your senior years. This will involve making sure you have enough wealth, and it will involve planning for the succession of your business.
Determine How Much You’ll Need
The first step in this process is to calculate how much money you’ll need to fully fund your retirement. If you own a home, estimate when you expect to repay your mortgage in full. Calculate your monthly expenses and create a plan for having your credit card debt fully repaid by the time you reach retirement age. Don’t forget to include entertainment and leisure expenses, such as the cost of vacations, dining, and other forms of entertainment you enjoy.
Decide How You’ll Handle Your Business
You should already have an exit plan that will establish what will happen to your business when you retire. If you want to continue earning income from the business, you may want to take on a more active partner. If you plan to fully retire, decide if you’ll pass the business on to an adult child or sell the business. If you create an exit strategy now, you can make the arrangements in advance for initiating your exit strategy.
Choose a Retirement Plan
As a business owner, you have a variety of options for retirement plans. You can start saving immediately with a traditional or Roth IRA plan. An alternative is to start a SEP IRA plan, which acts as a pension plan for freelancers and small business owners. In a SEP IRA, your contributions are tax free until they are withdrawn at retirement age. Another option is to start a solo or individual 401k plan. You can use your 401k contributions to create either a Roth or traditional IRA account.
Above all, you should create a retirement strategy early to ensure you are prepared when the time comes. Even though you may have just started your business, it’s not too early to determine how you’ll retire and what you’ll do with your business. Creating this plan now will give you peace of mind well into the future.