How do I plan for retirement as a small business owner?
Q: Dear Ruchi, freelancing has given me such a sense of happiness and freedom. When I was first starting out, everyone warned me to be careful and make sure I was still investing in my retirement, health insurance, and all of the other things corporate jobs typically give you that I now have to supply for myself. Though retirement is a long way away, I want to prepare for my future. Right now I am just overwhelmed and trying to figure out where to start. Any advice?
A: Welcome to the world of being a small business owner! Planning for your future is the biggest gift you can give yourself! Not only does this cultivate a prosperous life but it can help you and your loved ones for generations to come. A few months ago I was interviewed by Kelley Holland on this topic for Millie Magazine and she shared some wonderful tips!
Through working with my clients, I found that many of them were coming to me a couple of years into their business and hadn’t done anything about retirement. After all, it’s pretty easy to get overwhelmed when you start to look at the options and sometimes people don’t even know where to start or what questions to ask. But, lucky for you… you certainly came to the right place!
Here are some options to consider:
Open an Individual Retirement Account (IRA)
This option is great for everyone and you can make contributions yourself on your own time. IRAs are great for long-term tax-free savings.
Open a Simplified Employee Pension (SEP) IRA
This is best for solopreneurs and independent workers. This option allows a higher range of contributions and may even be tax deductible! Most of my clients start out this way.
Open a Solo 401(k)
This option is best for business owners with no employees. This allows you to contribute up to 100% of your income. This may also be tax deductible.
Seek a Savings Incentive Match Plan for Employees (SIMPLE IRA)
This is for small businesses with under 100 employees. These accounts make for a super easy setup but allow a lower employee contribution limit.
Narrow down these options by making a pros and cons list for each and start crossing off those that do not apply to you or your business, and don’t forget to speak to your accountant or financial advisor. Be sure to consider which option suits you best in the long term.
For a more in-depth look at these take a peek at Kelley’s article in Millie Magazine!
Here’s to your prosperity!
Ruchi