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Retirement preparedness is becoming increasingly important as we see a high number of individuals approaching retirement age without adequate savings to cover them through the next decades. This is especially the case for some 47% of business owners who don’t have any retirement plan in place. While many individuals in the workforce have the benefit of employer provided retirement and 401(k) plans, some even including employer matching benefits, many business owners lack this as a personal work benefit.
So, what can business owners do to turn this around and start preparing adequately for their retirement?
Set Up an Individualized Retirement Plan Immediately
Any business owner, whether they own a small, mid-sized, or large business, should make sure that they aren’t lacking the preparedness that many others have in terms of retirement. While many business owners feel that relying solely on the success of their business to create enough funds to carry them through, this is a risk that most should not be taking. Business owners should set up a retirement plan as soon as they can in order to start contributing and building a retirement safety nest.
As it stands now, solo 401(k) plans allow individuals to contribute up to $18,000, a little more if you’re 50-years-old or older. This allows business owners to start putting money away and allowing it to build onto itself as they get closer to retirement. As the business does well, and owners are able to pay themselves more, they should be putting as much into their plans as possible up to the federal limit. This decreases the risk of not having a retirement back-up fund in the event that the business would fall onto hard times or have to close.
Prepare an Exit Strategy
Every business owner’s career comes to an end at some point. Business owners approaching retirement age should be thinking ahead to the future after they’ve left their business behind them. This means deciding whether they’ll want the business to remain open at all, and if so, how to pass it on to the next owner. If the business is to be sold, owners should be keeping their ducks in a row and communicating with potential buyers so that the process can be made easy. If they are to pass the reins down to a family member, they should incorporate them into the processes of ownership so that they can adequately and confidently take over when the time comes.
Audit Individual Assets and Grow a Nest Egg
Those owners who are getting close to retirement age and haven’t yet made a retirement savings plan can still audit their personal assets to look for any ways they can create or increase a nest egg. Houses, cars, jewelry—these are all big ticket items that aren’t always a necessity. If you can afford to live in a smaller home, drive a more affordable car, or part with some jewelry or valuables you no longer have a need for, you might be able to come into some money to jump start a retirement plan fund. Even existing life insurance policies can sometimes be sold in order to obtain a large up-front amount of money.
Through a life settlement, a life insurance policy holder can sell their policy into the secondary market for a sum often greater than the policy’s surrender value. In many cases, seniors close to or in retirement have benefitted from selling their policy in order to pad their retirement funds.
If you’re interested in learning more about how life settlements work, please visit out our website today!