Menu

Retirement For Business Owners: It Pays To Count The Cost Early

When it comes to planning for retirement, there is no such thing as starting too early. In order to have the retirement one deserves, one needs to start working out how much money is going to be available and how to make the most of it.

Business Owners have the Sole Responsibility

As a business owner, the responsibility for planning a retirement falls fairly on one’s own shoulders. There is no possibility of relying on an employer to set one up in a work-based pension plan or make sure that a portion of one’s salary is being saved every month. To reduce the stress of wondering whether there will be enough money in the pot to make a retirement comfortable, it is imperative that plans are laid down while still working. One has to consider how costly a retirement is going to be depending on any plans. It is also important to take into account other factors and put money aside for the bills that cannot be anticipated, such as treatment for illnesses and accidents that will need medical attention. Medical and healthcare expenses can soon mount up and naturally, the older one grows, the greater the likelihood of needing such services.

However, ordinary savings may not deliver the kind of returns that are necessary for this wonderfully comfortable retirement, so it is a good idea to start looking at financial investments while one is still an active member of the workforce. Rather than opting for high risk, high return strategies, it is far better to make low to medium risk investments that will bring a steady, if not staggering return on the initial sum.

Retirement For Business Owners: It Pays To Count The Cost Early

There are four reliable ways of doing this for business owners, especially those that own a small business that requires flexibility. These are basic IRAs, Simplified Employer Pension (SEP) IRAs, Roth IRAs, and 401(k)s. For the new business owner who has less money to save available, the best choice is the Roth IRA. Those who have slightly more saving power should opt for the basic IRA or 401(k). Both options depend on whether the business owner would need the facility of being able to access the money quickly and easily, while the SEP IRA allows greater deferral and works better for companies that are either a partnership or have only a few employees. The 401(k) is the best choice for the self-employed business owner and is far easier to set up than the other options, the only drawback being that contributions are capped at $44,000. All these methods also have the advantage of reducing pre-tax income, as well as being safe, secure, and untouchable by creditors, should the business fail.

Those entrepreneurs who prefer to play with their money and get higher rewards could choose to invest in stocks. If a business owner is new to stocks and shares, it is best to start out small, only investing capital that he or she can afford to lose, at least until he or she has learned how the market works. Land is always a good investment, so buy some real estate if possible. It never hurts to diversify when it comes to finances, as it means one has fingers in many pies, so to speak. Those who are serious about making retirement plans should consider seeking the advice of a financial advisor.

Just how specific retirement planning gets depends on the individual. One person may be quite content with just ensuring that the money is going to be there, while another may want to know not only how he or she is going to live, but also where. Relocation is a real consideration for many retirees. Some even decide to move to another country where the cost of living is considerably less.

There are other retirement relocation considerations too, particularly for people with health issues. These include whether they want to continue to maintain their own residence or whether it would be more cost effective, and more beneficial, to live in a retirement community with all the facilities they require virtually at their fingertips. This type of collective has all the advantages of retirement with few, if any, of the drawbacks. They offer security, ease, and value for money, without compromising on a person’s independence.

With people living longer and the government already struggling to give its citizens decent pensions, it makes sense to begin planning and saving for retirement as early in one’s working life as possible. After all, the earlier one begins, the more money there will be when it is time to retire.