How to Plan for Retirement as a Small Business Owner
Many small business owners are too focused on their day-to-day tasks to be concerned about retirement — even if it’s a few years away. Small entrepreneurs 50 years or older are far less likely to have a concrete retirement plan than regular employees. In fact, SBA reports that small business owners are less likely to retire at all.
While it’s important to focus on your business’s success, it’s equally important to start creating a plan that will give you financial independence for the next chapter of your life.
Planning for retirement can be overwhelming, but the earlier you prepare, the smoother your transition will be. Here are five simple steps you can take right now to prepare for your retirement in the future.
1. Set concrete goals
When planning for your retirement, you need to decide where you want to end up in the future. Do you want to live in a mansion or in a simple apartment? Do you want to travel the world or simply live a modest life? Knowing what you want to accomplish in life allows you to start planning how to achieve those goals.
Keep in mind that the goals you set should be specific, measurable, time-sensitive, and most importantly, realistic so that you can work towards the retirement lifestyle you envision.
And whatever your goals are, write them down where you can see them to narrow your focus and provide you with short-term motivation and excitement.
2. Have an exit strategy
Once you’ve settled your goals, you need to consider what happens to your business when you retire. Whether you choose to sell the business, hand it down to a family member, or have an employee take over and buy out your interests, this decision will be your ultimate guide in preparing for your future exit strategy. In addition, you’ll need a lawyer to help you determine the legal requirements for creating a succession plan.
3. Build your support team
Most successful people surround themselves with a team of professionals in all aspects of their lives. Since you need to have strong knowledge of investments and tax law in creating a retirement plan, building the right support team can help you plan and execute every step effectively. Consider adding the following professionals to your planning team:
- Financial advisor
- Certified public accountant (CPA)
- Business attorney
Listen to the podcast: Interview with Bill Flynn, who mentors teams to get further faster and take the guesswork out of growth
4. Consider your other assets and investments
Now that you have your goals and exit strategy, it’s time to consider other assets and investments. Consult with your financial advisor on how to maximize your future income and adjust your investments accordingly to meet the needs of your retirement lifestyle. Do your research and look at investment options that could give you the best potential income.
5. Diversify your retirement savings
While you can fund your retirement by selling your business, relying solely on money from a sale might present challenges in bankrolling your golden years. It’s better to diversify your retirement planning by funding and setting up several savings accounts as early as possible. You have different retirement plan options, including self-employed 401(k)s, regular IRA (Independent Retirement Account), or SEPs (Simplified Employee Pensions).
Conclusion
Congratulations on all your sacrifices and the years of hard work you’ve put into making your small business what it is today. Retirement doesn’t have to be scary, especially if you know you have enough assets and investments to achieve your long-term goals. If you feel you’ve reached the age of being in the next chapter of your life, these five steps will put you on the path towards a retirement you deserve and enjoy those golden years the way you envisioned them when you were young.