Funding your retirement is a vital consideration if you are a small business owner. Studies from the Small Business Administration indicate that there is a 75 percent chance you have no plan for funding your retirement. 40 percent of small business owners have no savings at all. Like most business owners, you may invariably believe that the sweat and treasure invested in your business will result in a sale of the enterprise that serve as funding your retirement.
As the recent downturn suggest, the value of a small business tends to be overestimated by the proprietor. Small businesses rarely serve as standalone means for funding your retirement. Most small businesspersons have dependents relying upon them for providing the retirement funding to allow them to maintain a certain lifestyle for an extended time frame.Funding your retirement is a disciplined process. The business owner should include a funding your retirement plan as part of the general business plan. This retirement funding should be included in the succession plan and considered in all investments the owner makes in the business.
Proud small business persons tend to spend money that should be dedicated to retirement savings on the business. Granted adhering to the retirement packaging can cause cash flow difficulties but it is easy to get trapped in the belief that what is invested today will have value in the future. The 2008 recession has once again demonstrated the weakness of this strategy.Too many small business owners fall into the dangerous territory of feeling they are working for their employees. A recent article from Bloomberg Business Week cites data from the US Census Bureau’s Survey of Income and Program Participation compiled between August 2009 and November 2009 reveals distressing information. Of the 4,773 business owners with less than 100 employees, the small business owners have significantly more invested in their business than they do in their retirement plan.
Surprising Statistics
Average number of small business owners expect to retire at age 50, three years later than their employees expect to retire. In many cases, small business owners never expect to retire. This explains the lack of initiative or determination in funding your retirement. As a discipline, funding your retirement requires analysis of your expected retirement lifestyle and the time frame when you expect to retire. You can include provisions to make regular deposits in a SEP, 401(k) or IRA in your business model that will be there in the future regardless of what happens to your business.
A successful business can certainly meet many requirements of your retirement but you must apply the same discipline to growing your enterprise as you do to funding you retirement. This entails development of a personal financial retirement and estate plan. To many small business owners regard this discipline as secondary to the discipline applied to running the business.Business owners should be mindful that we work to live and be careful not fall prey to the concept that we live to work. Your commitment to funding your retirement is a means to ensure your future and the future of the persons who depend upon you.
Obama Administration Addressing New Policies
The Obama Administration has been aggressive in developing new retirement choices for small businesses. There are currently 75 million Americans that have no retirement plan through their employer. New programs are expected to be forthcoming that allow business owners to adequately fund retirement account.With government seemingly determined to change social security, it has never been so important to develop successful funding your retirement plans. It takes courage to begin a new business. SME businesses that fail usually lack sufficient planning. Founders must recognize that every component of the business model and succession plan must have balance. One ingredient in that balance is funding your retirement.Principals often must start a low level retirement package with relatively low deposits that do not cripple the business. However, funding your retirement with flexibility and direction provides the small business a bit of tax-free revenue that yields rewards when your participation in the business lessens or when the business is sold.
