When you’re running your own business, it’s easy to get caught up in the sense of accomplishment that you feel and the day-to-day operations necessary to keep things running smoothly. Most owners don’t even think about how when they will retire or the steps they need to take to do so because they figure they will just sell their business when they’re ready and the proceeds will sustain them.
However, as a business owner, you are even more susceptible to not having enough money to retire with because your entire well-being lays on you and you alone. There is no company-provided 401k to prompt you to put money away each month. If you want to be able to comfortably retire and not work for the rest of your life, you need to start planning now rather than later.
A common mistake (and hot alternatives)
Many small business owners think the best course of action is to put all of their disposable income back into their business in order to make improvements that could boost revenue. While it is smart to continuously invest in your business, it isn’t wise to forgo allocating money towards your future.
Instead, if you are the owner of an early start-up, put away a small amount each month into a Roth IRA. Once your business begins to grow, you can move funds in a traditional IRA, which will provide tax benefits for your business. And after business really begins to take off, meet with an adviser and discuss setting up a SEP IRA (Simplified Employee Pension), which will allow you to contribute up to 25 percent of your net self-employed income.
The answer: start now
As a small business owner, the answer to the question of when to begin preparing for retirement is now. Don’t procrastinate or tell yourself that you need to reach a certain number of sales before you can start putting money away. Investing in your future is a venture that can’t wait and the outlook will only dim the more you put it off.
Your business may be your pride and joy, but don’t put all of your eggs in one basket and assume it will take care of everything 30-40 years from now. Market conditions could change and affect your revenue, so it’s better to put money away today, whether a small or large amount, and be certain it will be there in the future, rather than placing all bets on a future sale.