How To Retire as a Small Business Owner

(2 Minute Read)

A recent survey shows that more than half of small business owners don’t have a retirement plan in place, and more than one-quarter don’t believe they will be able to retire comfortably. These numbers alone make financial advisors cringe. As a small business owner, you may be in it for the love of it, but at some point you’ll need to stop working. While you’ve built a business that you can be proud of, when it’s time to hang up your jacket and walk out for good, will you be ready? Here are 4 steps that every small business owner should take in order to properly secure a healthy retirement plan.

1. Set Goals

Goal setting is the number one reason that anything works. Setting a reasonable goal for your financial retirement can put a tangible finish-line that you can work to achieve. Many small business owners don’t have retirement plans in place because they genuinely want to continue working at some capacity throughout the rest of their lives. It’s great to work doing something you love, but when managing the business full-time becomes too difficult for you, a back-up plan is necessary. Speak with a financial advisor about your desire to create a retirement plan and work together to develop one that is comfortable and reasonable to accomplish.

2. Building The Right Plan

As a small business owner, planning for retirement is a little different. While most salaried career positions will provide retirement plan opportunities for employees, entrepreneurs have to work to build their own retirement plans. Whether you’re trying to gain some knowledge before making the decision to start your own business or you’re currently a small business owner looking for ways to save for retirement, it’s important to start as soon as possible. A lot of business owners believe that they can sell their business and live off of the funds earned from it. Small businesses are tricky, though, and in order to best prepare for your future, you should obtain a valuation range so that you are aware of the value of your business. If you’re banking on the idea that your business is worth $1 million, you could end up with a top bid of marginally less, which would eat into the retirement funds you thought you had to live with. This being said, building an IRA as soon as possible is the right step in assuring that retirement funds are there when you need them.

3. Consider The Values of Your Assets

For some, thoughts of retirement planning don’t come until it’s too late. If you’re ready for retirement, but aren’t sure you’re going to have the proper funds to have the kind of lifestyle you want, you should consider downgrading or selling your assets. The biggest asset you have would be your home. If you raised children in it, chances are that it’s too big now and you could do with a little less space. That space is money and being able to sell your house and purchase a smaller one can really up the amount of funds you have for retirement. Another asset that many folks, including financial advisors, don’t realize they have in their favor is a life insurance policy. Life insurance policies often become unneeded, unwanted, or unaffordable for seniors and retirees as they find themselves making premium payments while also having to live below the standard that want for themselves. In order to supplement the amount of retirement funds you’ll have, consider selling a life insurance policy into the secondary life insurance market. This is called a ‘life settlement,’ and the transaction transfers the ownership and beneficiary to the buyer and the buyer pays the seller a lump sum of cash that while lower than the policy’s death benefit, it is still higher than the policy’s cash surrender value.

If you or your client are considering a life settlement as a way to increase your retirement funds, use our Qualification Calculator to see if you qualify for one!

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