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For business owners, planning for retirement is often intimidating. Your income may fluctuate based on business cycles plus you may not have access to the same types of retirement plans that a traditional employee would. Ty J. Young Wealth Management has advised countless small business owners on building a retirement plan that is reliable and achievable. Their team has outlined some of the most important questions that a business owner must ask when planning for a secure retirement.
It’s important to keep in mind that as a business owner, you need to take responsibility for your retirement planning as you often have less resources available to you than you would as an employee. Taking action early is also a great way to give yourself the preparation necessary for a successful retirement.
Some of the most frequent questions and challenges for business owners are set forth below.
What are the important differences when planning for retirement as a business owner?
Business owners and entrepreneurs are unique and they’re unique for a lot of reasons. As they start businesses, they’re typically investing 100% of their time and resources in the growth of that business. Sometimes those businesses do well and succeed, and more times than not, those businesses in the first few years fail.
It is important as a business owner, whether your business is doing well or poorly, to plan for retirement.
What types of investing options are available to business owners?
As a business owner, you typically do not have the availability of a 401(k). That is typically for a company with over 100-150 employees. You do however have an advantage. If you’re a sole proprietor, you can set up a SEP IRA where you can contribute more than you could to a 401(k), so you have an advantage in that regard.
If you have several employees, you can do something called a Simple IRA. It is essentially a 401(k) type plan for a small business of less than 100 employees. As a small business owner or sole proprietor, you have options and in some cases they are as good or better than someone that works for a corporation. You just have to know what they are and how to use them to your advantage.
What’s the first step they should take to setting up a long term retirement strategy?
Live below your means. Do not invest everything back into the business. We’ve all heard, “pay yourself first,” that includes funding your retirement plan: IRA, Roth IRA, SEP IRA, or Simple Plan. You should work with a Financial Advisor or CPA to figure out the right one for you, but it comes down to ensuring you are funding the plans consistently, and you must invest the money wisely once it’s in the plans.
As an entrepreneur, we like to do things our way and differently than everybody else. The plans that are available for entrepreneurs provide you complete autonomy to choose the investments you think are best. Whether you want your money safe and growing or you want to take a lot of risk, there are a lot of options on both ends of the spectrum. But, you have to get started, save, match your own contributions and have it growing tax-smart.
There are three ways to have your money grow:
- Taxable – This would be money that in stocks that when sold would have a capital gains tax.
- Tax-Free – This would be a Roth IRA and is the best option when available.
- Tax-Deferred – This would be a traditional IRA, SEP IRA, or Simple IRA.
The first step in a long journey is a step in the right direction. You have to get started.
About Ty J. Young Wealth Management
Ty J. Young Wealth Management is one of America’s largest independent wealth management firms. Founded by Ty J. Young in 1998, the firm manages more than $1 billion in assets for more than 7,000 clients nationwide. They are recognized as a thought leader in investment management, retirement planning and insurance with Ty Young frequently being featured on CNBC, Forbes, Fox Business and more. Learn more about Ty J. Young Wealth Management at: https://www.tyjyoung.com/
