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How Small Business Owners Can Plan a Retirement Strategy

You need to have a retirement plan strategy, even if you are a small business owner. Check out various retirement savings mistakes to avoid so that you won’t commit blunders for which you have to pay for in the future. Here are some retirement planning strategies that you can adopt.

  • Calculate the Numbers

Your business won’t be present to handle some of your retirement expenses in the future. You must have a ballpark figure of your possible post-retirement living expenses to help you understand how much you need to start saving. Use resources like calculators and retirement worksheets that are available online to help you. Once you have the numbers, you can devise strategies to save carefully.

  • Diversify Your Retirement Plan

Having a diverse retirement plan would be greatly beneficial. The four main options include:

  1. SEP-IRA which is a tax-deductible retirement plan like a traditional IRA and a great option if you are the company’s only employee.
  2. Solo 401(k) is for self-employed people with no employees. You can contribute $56,000 (or $62,000, if you’re older than 50). If your spouse works with you, she or he can also put in the same amounts.
  3. SIMPLE IRA is for owners with 100 or fewer employees. The contributions are pre-tax and taken directly out of employee paychecks.
  4. SIMPLE 401(k) is for businesses with 100 or fewer employees. You and your employees may contribute up to $19,000 for 2019; $25,000 for people 50 years and older.
  • Develop Exit Strategy

You need to consider numerous things while developing exit strategy — would you be selling the business in order to fund the retirement, will you sell it to a competitor or will you hand it over to a business partner, family members or some executives? To get the most out of your biggest asset, you need to get a business valuation to know how much your business is actually worth before you sell it. Don’t wait until the very last minute to plan your exit strategy as it may mean that you will be forced to sell your company at a lower value or as a distressed sell, which will most definitely ruin your retirement plans.

  • Check 401 (k) Plans for Small Businesses

Numerous 401(k) providers are actively targeting small business. If you have fewer than 100 employees, you can get a low-cost, all-ETF 401(k) plans. According to research, 60% of small business owners don’t think they have enough employees to offer a plan which is a prevalent misperception. The truth is that business of any size, even an owner-only business, can have a 401(k) plan.

  • Use Tax-Saving Strategies

After you retire a major portion of the tax deductions that you would be used to will vanish and you could end up giving considerable amounts of savings to the IRS. As a business owner, it is possible that you make too much income to be able to contribute directly to a ROTH IRA but there are various tax-saving strategies that you can implement.

You can convert the traditional IRA funds to a ROTH IRA, slowly over time. This way you can pay taxes on the funds outside of the retirement. Consider using software to determine the most tax-efficient withdrawal strategies for your unique circumstances and purchasing a universal life insurance policy.

Retirement planning can be tricky and you might get not get it all right if you do it on your own.  Consider taking advice from a financial adviser and you can be assured of a secured retired life.


Author Bio: Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last 10 years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement as well as Business.com, SAP, MoneyForLunch, BiggerPockets, SocialMediaToday, and NuWireInvestor.

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