Your Business & Your Retirement

Your Business & Your Retirement

In the past couple of years, who would you think would be one of the fastest growing small-business owners in this country? Adults, especially women, between the ages of 55-64. Granted, some new small-business owners and freelancers are going into business for themselves because they’ve been unable to find another job after a layoff. But that’s also why so many Boomers succeed being their own boss. There are years of experience under your belt, and possibly a renewed vigor to do your own thing after being in a more formal environment for so long.

But, there are caveats with running the show this close to retirement. Small business owners tend to be wary of locking funds up in a retirement account in case they may need them to float unexpected business costs or setbacks. Also, some of the tools out there such as a SEP (simplified employee pension) and SIMPLE IRA require business owners to contribute the same percentage (up to 25% of earnings) to not only themselves as owners but to employees as well. But don’t let the need to contribute to everyone’s retirement be the reason why you don’t contribute to your own.

Your Business & Your Retirement

Consider that contributions to a SEP and/or SIMPLE IRA can be made once a year, when you file your taxes, or, even later. You can have a full picture of your books, your tax bite and the upcoming quarter by then, all to gauge what you can comfortably contribute to your retirement.

There’s also a solo 401k if you are a sole proprietor and have no employees. Solo 401k's function much like a traditional IRA and you may also have access to a Roth version. This is the only self-employed IRA that allows you to borrow against the value. Not a recommended move, of course, but in a bind the option is available to you.

Key to managing retirement while owning a business or working for yourself is making sure to keep saving for the future on the front-burner, especially this close to possibly retiring. The tendency is to sit on cash out of ‘just-in-case’ fear but instead, research each savings option available to you and set up a system to contribute, every year.

As to where you invest your money, in your SEP or IRA? Small business owners, though in big need of more savings, should be even more cautious investors than folks with pensions and steady, employer-sponsored benefit plans. You are not only your own boss but also your own benefits department, employee and family earner. So much responsibility also means already you’re exposed to so much more risk than the average investor. Keep your asset allocation balanced toward a more conservative portfolio and avoid investing in other stand-alone businesses. You’ve already taken the biggest and most rewarding risk of going it on your own. Protect what you’ve earned. For more help and to work with a professional advisor, visit Advisor Direct.

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