Retirement planning: 3 steps for small business owners

0

PeopleImages/iStock.com

While the biggest investment small business owners typically make for retirement is their business, it’s never too early to start planning and investing for retirement outside of your business plan.

Check Out: The Best Cities With Great Weather to Retire on $2,000 a Month
Find: The Best Cities to Retire on a Budget of $1,500 a Month

GOBankingRates spoke with Nilay Gandhi, Senior Financial Advisor at Vanguard Personal Advisor Servicesto learn more about the three-step process that can work for small business owners and allow them to enjoy a comfortable retirement.

Find out how small business owners can plan for retirement.

1. Have a budget

“The first step is to have a budget that includes saving for pension contributions, especially if there are uneven cash flows,” Gandhi said.

A budget is the cornerstone of effective money management. A budget lets you know how much money you’re getting and where it’s coming from, how much you’re taking out and exactly where it’s going.

Using a budget allows you to track fixed, variable, and recurring expenses and better understand your spending habits. Once you have this understanding, you can set meaningful financial goals, like saving for retirement, and create a spending plan to use once you retire.

Take part in our survey: do you think you can retire at 65?

2. Discuss your options with a finance professional

Several pension plans are available to small business owners. Some of these include contributing to an IRA, whether traditional or Roth, or a 401(k). As the business grows over time, business owners may consider a SEP or Simple IRA.

The best way to determine which plan is right for you, Gandhi said, is to consult with a financial professional. Discussing the options with a professional allows business owners to learn about larger plan offerings, such as defined benefit or defined contribution plans, which may be better suited to help maximize savings, reduce taxes and reward owners and employees.

3. Save as much as you can

Put as much savings as you can toward retirement each year.

“Even if it means that in some years there are minimal contributions or you are not able to maximize,” Gandhi said, “the power of time and capitalization cannot be overemphasized.”

do not wait

Many business owners want to focus on their business and its needs now. They may think retirement planning can be left for tomorrow, but it’s important not to develop an “I’ll do it another day” mentality when it comes to retirement.

“The earlier you can plan for retirement, the better,” Gandhi said. “It’s important to recognize the different strategies available, depending on whether you’re self-employed or not, and to contribute early and often.

More from GOBankingRates

About the Author

Heather Taylor is Senior Financial Writer for GOBankingRates. She is also the editor and brand mascot enthusiast for PopIcon, Advertising Week’s blog dedicated to brand mascots. She has been featured on HelloGiggles, Business Insider, The Story Exchange, Brit + Co, Thrive Global and other outlets.



Source link
Share.

Comments are closed.