Why Small Business Owners Need to Plan for Retirement
Most small business owners tend to invest extra wealth back into the business. Saving for retirement is a secondary thought after growing a business. However, waiting too long to invest in your golden years could be detrimental.
According to a July 2016 BMO Wealth Management survey of 400 small business owners, only a fraction of America’s entrepreneurs are prepared for retirement. There is no requirement for independent contractors and small business owners to set up a retirement plan. Therefore, many keep delaying it, thinking that they can start contributing to a small business 401(k) when the business improves. Business owners must also face the reality that if they are relying on the hope that the business will sell to fund retirement, there is a possibility of a sale not coming to fruition.
So how can you ramp up your savings for retirement?
Know your personal numbers. What is your current financial status? How much will you need to live on in retirement, especially when the business isn’t picking up the tab for some expenses? Get a sense of what your living costs might be when you quit working so you can get a true understanding of the amount of money you need to set aside for retirement.
Start a diversified retirement plan. Investment in a small business 401(k) or IRA is an easy way to grow your contributions exponentially. The longer the money stays in the fund, the more it can grow. There are several investment options available to small business owners where contributions are entirely at the plan holder’s discretion. If you find yourself short of cash for a year, you can contribute less or even suspend contribution for that year without any consequence to the existing fund.
Meet with an advisor to discuss your financial future. If you don’t want to go it alone, a qualified financial planner can help you set financial goals and priorities, then recommend specific steps to meet them. This means they may give advice on how you should allocate your investments and explain how certain moves may affect your taxes or estate. It’s then up to you to decide if you want to follow that advice. A good planner will also recommend when you need more specialized help, such as working with a wealth management specialist to set up trusts and estate planning. They can discuss services and solutions that help build, preserve and manage your financial future. Texas Gulf Bank Wealth Management officers regularly work with financial planners to understand a client’s aspirations and help develop a solid strategy to achieve each individual’s goals.
Wealth Management Department Investments include non-deposit investment products which are:
- Not bank deposits
- Not FDIC insured
- Not insured by any federal government agency
- Not guaranteed by the bank
- May decrease in value