Written by: Rick Judd, EVP, Wealth Management & Branch Banking, Union Savings Bank
Small business owners are accustomed to putting the needs of their businesses and employees before their own. In many circumstances, this dedication has been the key to building their small businesses into successful organizations and their employees into loyal team members. When it comes to retirement, however, putting everyone else’s needs first can make the next stage of your life much more challenging. The good news is, it’s never too late (or too early) to start planning and saving for retirement. Whether you’re planning to retire in two years or twenty, here are 3 important tips about retirement for small business owners.
Start saving for retirement now, even if it means starting small.
It is truly never too early to start saving for retirement. And while it’s also never too late, there is no better time to start than right now. Putting money away a little at a time can have incredible results, simply thanks to the power of compounding interest. If you are hesitant about starting your retirement plan, begin with small contributions to your small business 401k. As you watch your savings grow, you will likely realize that the money you’ve set aside to help safeguard your future is not impacting your small business.
When opportunities to get ahead in your retirement savings plan arise, be sure to take advantage of them. As soon as you are able, contribute the annual maximum to your 401k plan. For 2019, that has increased to $19,000. If you are over the age of 50, you may make an additional “catch-up” contribution of $6,000, for a total possible contribution of $25,000 next year.
Define what retirement means to you, and plan accordingly.
For some small business owners, retirement looks like a beachside home in a tropical climate. For others, it looks like a year spent traveling the world. No matter what you see when you imagine your life in retirement, putting the retirement savings plan in place that will make it possible is essential. Calculating the cost of retirement for small business owners also means factoring in things like healthcare for you and any dependents, ongoing costs of living and preparation for the unexpected.
Also, make sure that your retirement plan is a true reflection of your lifestyle. Calculating the savings you will need based on a much more frugal lifestyle than you are accustomed to will only set you up for frustration down the road. Be realistic when it comes to mapping out your retirement, and keep this in mind when you continue investing and saving after you initially retire.
Make a small business succession plan if you don’t have one already.
If you intend for your business to continue operating once you have retired, you will want to create a small business succession plan. This will ensure that once you have stepped down, your business will be properly managed by the people who truly want the responsibility. A small business succession plan can also make your transition into retirement a smoother and more efficient process.
Prioritizing the success of your business often comes long before planning for retirement for small business owners, but just like starting your business, building the retirement you want begins with a single step. Taking that small step today rather than five, ten or even twenty years down the road can mean the difference between living the life you want in retirement and having to work far longer than expected. While taking that step may seem intimidating, once you have cleared the first hurdle you’ll be on your way to safeguarding your future.
For more small business tips, visit our Business Blog.