Retirement Planning for Small Business Owners

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Small business owners are in a unique position when it comes to planning for retirement because, as their own boss, they will not have a 401(k) or pension option from an employer planning retirement on their behalf. With a number of different plan options (the SEP IRA, the Self-Employed 401(k), Simple IRA, the Simple 401(k), and the Roth IRA, to name a few), deciding on one takes patience and sometimes, a little help.

Research shows that more than a third of small business owners don’t have a retirement plan even though around 35 percent of them say they started their businesses to fund their retirements. Furthermore, not having enough revenue in business to allow for monthly retirement savings is a leading cause for not making those contributions.

Still, proper preparation and planning for retirement is vital in order to foster financial stability later in life and improve financial well-being. If you’re self-employed, here are a few things to think about when planning for your retirement:


It’s wise to seek the assistance of a financial advisor or CPA to make sure your business strategy and profit margins are going to help you reach your retirement and savings goals in the long term. Selecting a retirement plan on your own can be complex with many differing variables to consider like setup fees, annual charges, general maintenance, tax-deferred growth, and borrower flexibility. Seeking help from a financial advisor or a certified credit counselor is a worthwhile business expense which helps you save money in the long run.


In lieu of saving excess cash for retirement, many small business owners would rather put that money back into their business for the purposes of an immediate return with regard to improvements or expansion. Unfortunately, there is a risk in putting all profits back into the business because if the business ever fails, you’ll never recover the input. Maximize your savings in a retirement plan with a bet you can’t lose, no matter what happens with the business.


It goes without saying that everyone should do this but knowing what your living expenses are in post-retirement can be the “ah-ha” moment you need to focus on saving money in the long-term. Check out the free online calculators on the Guidewell Financial Solutions website here to answer questions like, “how will my savings grow?” and “what does my budget look like?” These free calculators can help you get a better understanding of cash flow at home and in your business.


Lastly, it is important for a small business owner to decide not just what will happen to them after retirement but also what will happen to their business. Not only should they decide whether they will pass the business down to a family member, employee or friend, but they should also develop a detailed plan for how that transition will happen logistically and financially.

With the many daily responsibilities entrepreneurs face in owning and operating a business, it’s easy to table longer-term planning with the need to triage other business demands. Paying the bills and yourself can seem like priority number one, but if you’re a successful small business owner, retirement could be in your future earlier than you think.

By: Devon Hyde, Director of Business Development at Guidewell Financial Solutions