There are many benefits from small business retirement planning. Retirement planning can leverage your years of hard work. There are plans and benefits for those that are solopreneurs and those that have employees.
An issue that I see with some small business owners is the idea that the owner will eventually sell their business and those proceeds will be the owner’s retirement funds. Many times, a business owner is saddened to find the true value of their business is not what they expected. There are also tax consequences to be considered.
Although we hope a very profitable sale will eventually happen, it is wise to have a retirement plan in place with contributions being made today. This combination allows the owner to get the maximum benefit from their years of hard work. Also, having a retirement plan for employees is a benefit and may help attract good employees.
Types of Small Business Retirement Plans
Before getting some help, educate yourself on plan options, administrative requirements, and contribution limits. Keep in mind that plans and regulations can change quickly. The IRS has a nice overview of current plan options, eligibility and other requirements.
Brief Summary of Options:
- Payroll Deduction IRA (Individual Retirement Account)
- SEPs (Simplified Employee Pensions)
- SIMPLE IRA Plans
- Safe Harbor 401(k)
- Automatic Enrollment 401(k)
- Traditional 401(k)
Taxable investment accounts or ROTH IRAs may be suitable for some business owners.
Get Some Help
The planning and execution process requires choosing a plan and financial discipline. Small business owners should budget an emergency fund for operations, funds to reinvest into the business and funds for a retirement plan. It may be helpful to seek the assistance of a reputable CPA and Financial Advisor.
Benefits of Retirement Planning in General
- Peace of mind to lower those stress levels.
- Possible savings on taxes.
- Less reliance on social security.
- More enjoyable life in retirement.
Get the most from your years of hard work spent building your business. Consider a small business retirement plan.