Having all your eggs in the proverbial basket is disastrous for your future as an entrepreneur, especially if you are also not planning effectively for your retirement.
Retirement planning is a critical activity that should evolve throughout your entrepreneurial journal. This should be regardless of the money you are making or the value of your business.
The attainment of whatever retirement lifestyle you envision for yourself will depend on you. Planning is all about the strategies you lay down for designing that lifestyle.
Here are several strategies you can implement as a small business owner planning for your retirement.
Get a Financial Advisor
Navigating retirement planning on your own might lead to challenges, underutilizing the available investment vehicles, and investing in the wrong plans.
A financial advisor specializing in retirement planning will help you look at your business objectively, your retirement goals, obligations you might have towards employees, expenses, and possible savings you could make while saving for the future.
Investment vehicles such as 401(k)s and IRAs have regulations such as the maximum contributions, withdrawal terms, and penalties. Your financial advisor will help you to account for these terms and regulations and include them in your plan so that you are not blindly planning for your retirement.
If you intend to sell your business as a retirement plan, your financial advisor could help you establish the actual value of the business. They can also help you prepare for an efficient and profitable sale that cushions you during your retirement.
Plan for Retirement Based on the Stage of your Business and Life
A 25-year-old entrepreneur has more leeway to take greater risks with their investments, as they technically have better chances of recovering.
However, as you approach retirement, you should approach risk conservatively, knowing that your actions could potentially upset the retirement investments you have made throughout your journey.
Rapidly growing businesses with employees have different retirement options and resources that they can put into retirement investments.
You must take a realistic view of your business, your business goals, including growth and profit, and have a budget to guide your steps as you run your business and save for retirement.
Pick investment options such as IRA accounts, 401(k) savings plan, life insurance, long-term care insurance, and disability insurance to cover your bases.
Based on your risk tolerance, you could consider crypto products. Bitcoin, for example, has seen a lot of volatility but also significant growth. Opening a cryptocurrency exchange account on platforms like OKEx or Coinbase is easy and secure. Investing in cryptocurrencies can even become a great source of income in retirement.
Account for Assets, Income, and Liabilities
It is easy to be sidetracked by your retirement plans that you forget to account for your assets, liabilities, and income.
- Your home is an asset, but with the wrong planning, it could be a liability. Ask questions such as whether you want to live in the same house, sell your home and downsize, or rent an apartment. Take an objective look at your home and decide what you intend to do with it. Home equity alone should not be your sole retirement plan. Other assets include cash, savings, business company stocks, or jewelry.
- What will the lifestyle you want for your retirement cost? How much should you contribute per year to cover your lifestyle comfortably for about 20 years?
- Identify the liabilities that could expose your assets, for example, medical expenses, which usually increase as you age. You can have long-term care insurance, life insurance, or annuity.
- What income do you have? Is it sustainable, passive? Can it support you during your retirement?
Have a Withdrawal Plan
Have a strategy on how to withdraw your retirement funds and benefits. Your withdrawals will depend on the total amount you have as well as the lifestyle you lead.
Ideally, you should have enough to maintain your current lifestyle and last you longer. Plan how you will claim your social security benefits, asset allocation, and pension withdrawals.
The Takeaway
While entrepreneurship is all about taking risks and converting ideas into businesses, you do not want to gamble with your retirement.
Start investing early and adopt strategies to secure your financial security during your retirement. Consult with your financial advisor and choose the best strategies and plans that work for your goals.
