3 Tips on Retirement Planning for Business Owners

There’s no greater freedom than owning your own business. You set your hours, control the direction of the company, and enjoy a great sense of satisfaction in building something from the ground up. Throughout that whole process though, many small business owners fail to consider their own retirement. In a Forbes article posted in December 2016, it was noted that a BMO Wealth Management survey of 400 small business owners found only 11% of respondents had more than $500,000 saved. The vast majority, 75%, had less than $100,000.

Planning for your own retirement is vital. Here are three easy tips you can use to help plan for your future.

Choose Retirement Plans Wisely

There are a variety of popular company retirement plans that are simple to set up and administer, which can save time and money for you. Among your options are the following types of plans:

  • 401(k): a basic retirement plan that is suitable for businesses of any size, and includes both employers and employees under the plan’s coverage.
  • SEP IRA: Simplified Employee Pension IRAs are adopted by business owners to provide retirement benefits for themselves and their employees through larger employer contributions and lower start-up costs.
  • SIMPLE 401(k): designed for the small business owners with 100 or fewer employees, the SIMPLE 401(k) is funded by employer contributions and optional employee deferred compensation contributions.
  • SIMPLE IRA: a plan that provides small employers with a simplified method to contribute toward their employees’ and their own retirement savings.

It’s imperative to weigh the benefits of each of these options and make sure you choose the plan that works best for you, and your company.

Find a Successor to Carry on Your Legacy

Freelancer.com points out the importance of finding a caretaker to carry on the legacy of the company you took the time to build. Business owners need to consider who can carry on the objectives of the company after they have retired. You can start by finding the employee(s) that show a passion for their work and your existing client base. Who can rally and motivate employees, and share their passion throughout the company?

Next, take those individuals under your wing to begin cultivating the skills needed to run the business. Help them learn the logistics of handling the company’s operations. This gives them more time to learn before you retire.

Establish a Retirement Goal

If you don’t know how much your retirement is going to cost or when you plan to retire, you don’t know how to get there. You can start by calculating your expected retirement expenses, such as food, housing, leisure, transportation, and health care. From there, you can figure out your expected retirement income. Using the Social Security website, you can approximate your future benefits. You should also consider additional pensions or ongoing proceeds you’ll receive from your business.

With these figures in mind, subtract your expected expenses from the anticipated income and any shortfall between the figures represents the additional funds you will need to fund your retirement.

As an example, consider an annual cost of living of $60,000, and your Social Security income at $35,000 per year. You would need to fund the remaining $25,000 to make up that gap.

If this seems like a lot of work, you aren’t alone. Connections Financial Advisors can help you plan and establish a realistic retirement goal.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the securities, techniques and strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. 

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors. 

Investing in mutual funds involves risk, including possible loss of principal. The principal value of a target fund is not guaranteed at any time, including at the target date.

Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and, if available, the summary prospectus, contain this and other important information about the investment company. You can obtain a prospectus and summary prospectus from your financial representative. Read carefully before investing.

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