When present needs press in, it’s hard to think of anything but them. You need to submit an order by the end of the day or maybe it’s an administration day—the day you wrestle pivot tables and balance sheets into submission. On days like those, thoughts of the future become distant, if they’re thought of at all.
We get it. You have a business to run and a life to make. But without exploring retirement plan options, you basically shoot yourself in the foot. It’s no fun and entirely painful to both your professional and personal life. Investing for the future, now, protects both pieces and leads to a healthier business long-term.
We visited with several small business owners to get their perspective on savings and retirement plan options. Check out their suggestions and thoughts below.
Consider Your Investment Options
Some small business owners experience analysis paralysis when they contemplate saving for retirement. It’s an understandable reaction. A number of retirement plan options exist, and each contains nuances and fine print.
The most common plans include 401Ks and IRAs. All the plans hold benefits but only when used correctly. Some small business owners see better returns with 401Ks. Others treasure the security and safety found in some of the more flexible IRAs. Mark Aselstine, founder of Uncorked Ventures, uses a SEP IRA. He says it flexes to follow his business’ cash flow. When things are going well, he increases his monthly investment. When business slows, he decreases it.
Seek Professional Advice
Jeremy Schaedler, president of Schaedler Insurance Agency, Inc., offers words that are music to the ears. “As small business owners, we’re often challenged to be competent in many different areas,” he says. “But that doesn’t mean we’re supposed to have all the answers all the time.
“When it comes to saving for retirement, we should visit with advisers who are experienced in working with small business owners and the challenges they face.” It’s okay if you don’t know everything there is to know about retirement plan options. You don’t need to. CPAs, financial advisers, and attorneys exist for exactly that purpose.
Commit To A Plan
Once you commit to a particular type of investment, you should adhere to a payment schedule. Thomas Fallarino, founder and president of Empire Legal Reporting and Empire Executive Offices, puts the idea more simply: “always stash.”
“I used to think that saving for a retirement fund would potentially waste money that could be used elsewhere to help my business develop,” he explains, “but if you have no savings, you have nothing. Once I realized that, I committed to treating retirement savings account like a savings one. I recommend donating a percentage of business income every month and NEVER taking anything out. I also suggest taking a small percentage after closing a large, successful business deal and throwing it into the retirement pot.”
Keep An Emergency Fund
The unexpected happens. Rather than be caught unaware, Schaedler suggests being proactive. He says, “Make sure you have plenty saved in emergency funds to cover unexpected shortfalls or downturns. Your business is the goose that lays the golden eggs. Without it, you may not be able to save anything for your retirement.”
Besides emergency funds, many small business owners turn to nontraditional lending sources. The money can be used to cover tight months and to purchase necessary equipment and inventory, keeping the “goose” safe and ensuring it lays plenty of golden eggs in the future.
Add A Cash Balance Plan
As you near your retirement date, it might become apparent that you don’t have enough saved to settle comfortably into a post-business phase. You could keep working after retirement — and many small business owners prefer to keep busy — but you might want to consider adding a cash balance plan.
Salle Mullins Thompson, CPA and PLLC, recommends the plans because small business owners can invest a large amount within a short time frame. However, she urges caution when taking the step into one and seeking the assistance of a retirement plan consultant.
Make Safe Bets
Finally, you should exercise care when committing to a particular retirement strategy. Several polled small business owners, Brad Kingsley among them, spoke to the dangers of believing in a possible profitable sale.
Brad Kingsley, financial coach at Maximize Your Money, says, “Remember that if your retirement plan is ‘selling the business’—a $5 million exit looks a whole lot more like $2 million by the time attorney fees, closing costs, related adjustments and taxes are accounted for.”
Saving for retirement is important. By considering your retirement plan options, committing to an investment schedule, and making safe bets, you will claim a solid retirement package when, or if, you decide to retire. And, if you have any questions about securing your business’ financial health now, don’t hesitate to reach out to us. We’d be glad to help.