Planning for Retirement as a Business Owner

Planning for Retirement as a Business Owner

Oftentimes, small business owners pour their time, energy, and resources into sustaining and growing their business and they neglect to plan for retirement. The Small Business Administration (SBA) reports that small business owners over 50 are much less likely than employees to have a pension or retirement plan like a 401K. The report also found that small business owners were often later to retire, or may not retire at all. There are some steps, however, that business owners can take to be prepared and create options for retirement.

Creating a Plan

The first step toward retirement involves creating a plan and setting goals. It’s important to know how much you need for retirement. You can start with a basic retirement calculator which asks for information such as your age, current income, and current savings, and will try to calculate the amount you’ll need to save in order to reach your retirement goals. When planning, consider lifestyle questions like where you want to live and the cost of living, as well as accounting for an increased cost of living in the future.

Next, you’ll want to choose a retirement plan that is acceptable for self-employed persons. There are a number of options based on your business’ configuration and your goals. It may be beneficial to connect at this point with a Financial Professional at Eaton Community Bank to make sure you understand all of the options available to you.

Exit Strategy

The business you spend your life building, may likely become your greatest asset. If you do desire to fund your retirement and stop working in the future, it’s important to develop a plan to exit your business and liquidate your investment. It’s never too early to begin thinking about the right time to sell and the right seller to continue your life’s work. Your exit strategy may begin with a professional appraisal, as the true market value of one’s business can be a very difficult thing to assess. If possible, you should keep some flexibility in your exit strategy to account for market conditions in order to sell at a premium. You should also consider whether you have a strong desire to see the business continue, which will help determine who you sell to and when. For a small business owner, it can be difficult to imagine walking away from what you built, but a solid exit strategy will allow you to walk away feeling confident in your decision and in the future of the business you built.