Small business owners: Make retirement planning a priority

With retirement in the distant future, it comes as no surprise that planning may get put off during the day-to-day of running your business. Having a retirement savings fund will give you greater autonomy to choose when you want to retire as well as allow you to have assets that are creditor proof. National Small Business Week began on April 29, which makes it an ideal time to prioritize retirement planning for you and your business.

Since your income is tied to running your business, planning for retirement is essential for your future financial wellbeing. This means you can anticipate that your retirement will be funded by either the sale of your business to a third party or through the transfer of the business to a family member. Although we recognize that selling your business will typically generate the highest rate of return for retirement funds, it is wise to build savings outside the business.

With the rapid changes in the market, the businesses driving today’s economy may not be what’s driving the economy tomorrow. As a result, small business owners are particularly vulnerable to industry changes. This uncertainty exemplifies how a retirement fund can provide financial protection if the sale of the business doesn’t generate the income expected.

No matter the size of the business, you have more flexibility to design the retirement plan you want and put a substantial amount of money away later in your career. If the demographics are appropriate, one tool business owners can utilize is a cash balance plan. This is a defined benefits plan which has minimal additional employee costs and is tax deductible. Another strategy is to put your spouse on your payroll and max out his or her 401(k) contributions if their income isn’t needed to maintain your current lifestyle. If your spouse is over 50, those funds can quickly add up with the catch up provisions in a tax efficient savings vehicle.

Retirement planning as a small business owner offers you the opportunity to put more money away than you might expect. If you have any questions about how you can plan for your financial future, contact us at CirrusWealth@CirrusWealth.com.