Whether you’re dreaming of your own private island or a trip around the world with your favorite travel partner, chances are you’ve imagined the day when you will be able to hand over the reins of your business and begin to really enjoy the fruits of your labors. The question you should ask yourself from the first day you open your brick-and-mortar or digital business door is whether your financial plan will allow you to actually be able to live that dream.
Focusing on your future financial freedom is one of the toughest tasks for most small business owners – one they traditionally manage to neglect because they’re simply too preoccupied on growing and running their business right here, right now. Whatever spare time is left over after taking care of everything and everyone is rarely allocated to what may seem like yet another time-consuming task: creating long-term personal financial security, regardless of what happens to the business.
As an entrepreneur, you’re already skilled at juggling multiple balls. Dropping the one with your name on it is a mistake that you may not even realize you’re making. A wise man once said, “pay yourself first,” and perhaps you’ve even counseled a young employee to start saving early and often. Now it’s time to take that piece of advice to heart.
Here are three ways to help you get started to achieving financial security and a fulfilling – and well-funded – retirement.
- Pay attention to the right balance. Do you laugh when you read the term “work-life balance”? Long hours, grueling workloads and a hectic pace have long been badges of honor among start-ups and small businesses. However, as you may already have noticed from your Millennial workforce, the notion of offering up your proverbial soul for the good of the company is not quite the shared sentiment it used to be. The great news is that there are more information technology tools available than ever before to increase productivity while saving time, from strategic planning to speedy payment processes. You can use this extra time to focus on establishing your financial future. So, go ahead, take back a few hours and rebalance that work-life equation a bit.
- Calculate the cost of your happiness. While money can’t buy health and happiness (don’t we wish!), it can most certainly give you the priceless peace of mind that comes from knowing you’ll be able to financially manage any number of retirement needs, from epic adventures to unexpected challenges or emergencies. While your ideal retirement scenario will likely be ever changing, now is the right time to calculate just how much income you might need to enjoy your happy place as well as protect you against crisis. Consult with your financial advisor, such as our Wealth Management team, to create a custom map for your unique journey. And remember, it’s not a journey unless there are unexpected detours – which you and your advisor should anticipate and build contingencies for proactively.
- Harness the power of 401(k) plans. If you’re sending quarterly payments to the IRS and the state of Connecticut you know quite well that it’s getting tougher and tougher to accumulate wealth. One of the best possible antidotes to giving too much away is a company 401(k) plan. You’re not only helping your employees plan for their future, but you’re helping you and your business. A company sponsored and potentially matched 401(k) plan isn’t just a terrific way to attract and retain top talent. There are many plan structures available, from simple to complex, but in all cases you’ll want to work with an expert plan administrator to develop the right option, depending on the size of your business, cash flow and, of course, the future financial requirements.
According to a survey conducted by Forbes, only a fraction of America’s entrepreneurs are prepared for retirement. Out of the 400 survey respondents, 75 percent of individuals age 18 to 64, admitted they have saved less than $100,000 for retirement. Folks approaching retirement, those in the age 45 to 64 range, were even less prepared with roughly a third reporting more than $100,000 in personal savings. What’s even more troubling is that a mere 11 percent of these older entrepreneurs have tucked away $500,000 or more in a retirement account. Private island territory? Not so much – more likely, you’ll find yourself delaying your retirement indefinitely.
Whether you’re in the early-stage start-up phase or well on your way to building a successful enterprise, it’s never too soon or late to review the basics of personal financial planning, like in this retirement checklist for small business owners. Once you’re committed to taking that first step, the real work of engineering a customized plan begins. The right choice could even be a Roth IRA or traditional IRA or other type of savings plan, make sure you’re taking full advantage of the option that will help you realize your retirement dream. Just remember: do what’s best for you and your business. Whether it’s developing an employer 401(k) match program to keep your best assets or handing it over to a new regime.
If you have any questions on where to start or just want to review where you are, please call us at 860.567.6434.
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Written by Rick Judd
EVP, Wealth Management & Branch Banking, Union Savings Bank