According to recent studies, the average age when most Americans hope they can retire is 62. If you are a small business owner, then you are probably already used to marching to the beat of your own drum.
You could build up your business, sell it, and retire at 35. Or you might decide to work until you are 80, simply because you love your business so much. Whatever retirement you imagine for yourself, you need to start developing a plan for how you are going to make your dream retirement a reality.
1. Choosing a Retirement Plan
The first thing you need to do to retire is choose a retirement plan. Employees are often able to simply contribute to an employer-sponsored retirement plan like a 401(k), but entrepreneurs have to do more financial research. Some retirement plan options include:
- 401(k): If you are an established small business, you can offer your employees the option of contributing to a 401(k) to which you will contribute a percentage of their wages every year. If you are a solopreneur, and you want to maximize your retirement savings, you can create a Solo 401(k).
- Traditional IRA: A traditional Individual Retirement Account (IRA) allows for tax-deductible contributions (up to $6,000 a year), and that money is allowed to grow on a tax-deferred basis.
- Roth IRA: A Roth IRA does not allow you to deduct your contributions from your yearly taxes. However, once you are 59 and a half years old, you can withdraw funds from your Roth IRA account tax-free.
- Gold IRA: A gold IRA allows you to put your investments into more alternative methods such as precious metals.
Many people decide to have more than one retirement plan to maximize their retirement savings. This often includes having one type of 401(k) account and one type of Roth IRA account.
2. Safely Enacting Your Retirement Plan
Every single retirement plan has a long list of benefits and limitations. If you are serious about making the most of your retirement savings, it’s important to consult with a financial professional. Tax experts can help you safely enact your retirement plan.
If you want to ensure that your money has time to grow and accumulate, then you need to start planning for retirement early. Don’t wait until five years before retirement to start putting money away.
3. Protecting Your Business
As you plan for retirement as an entrepreneur, you must develop the plans and structures needed to protect your business once you retire from your professional life. Unless you simply plan on closing down your business, you are probably planning on selling it to bolster your retirement funds.
When the company changes leadership, you must decide what level of involvement you want yourself and your family members to have in the company moving forward. Would you like to maintain a place on the board? Would you like to be heavily involved in the leadership transition? By making these decisions years in advance, you can help to make the beginning of your retirement as stress-free as possible.
4. Managing the Leadership Transition
Your role as the leader of your small business will someday come to an end. As you near retirement, you will begin to make plans for what the leadership transition will look like. If you will maintain ownership of the business, but you are stepping down as a leader in the day-to-day, then you will need to find and train your replacement.
Find a young professional who has the experience and leadership skills such as organization, vision, and communication, to name a few. They can use these skills to take your company into the future and build upon what you have created.
By establishing a smooth leadership transition, you can allow for a positive experience for your employees and an easy start to your retirement.
Retirement requires a great deal of planning no matter what you do for work. For entrepreneurs, this planning is even more vital. By choosing a retirement plan early on and making key decisions regarding the future of your company, you can set yourself up for success decades in advance.
