The number of entrepreneurs who don’t have a retirement plan in place is astonishing. This may be due to a lack of planning, says the USA Today in its article “Business owners need extra planning for retirement.”
Compared to employees, small business owners have a different set of challenges. Plus, they need to address the question of what to do with their businesses.
It would be great if it's worth enough to fund their retirement, but there are two main steps that any small business owner needs to think about when planning for retirement.
First, he or she needs to create a retirement plan. It’s critical to get into the habit of saving for retirement. There are many types of retirement plans that a small business owner can use. For instance, a Keogh Retirement Plan lets the self-employed and sole proprietors contribute large sums every year to a tax-free account. They can deduct contributions from gross income, defer the taxes and the earned interest.
For anyone doing some late retirement planning, a solo 401(k) plan is a good choice. It offers high contribution limits—right now a solo 401(k) lets you to contribute up to $53,000 a year into your retirement account ($59,000 if you are 50 or older). There are different Individual Retirement Accounts (IRAs) that entrepreneurs may also want to consider. Talk with a retirement planning professional about what is a good fit for you.
The second challenge for the entrepreneur is the business itself. It can be sold, given to children, or closed. Regardless of the decision, business owners should work to make their companies as profitable as possible as they approach retirement, since it will be worth more if it's going to be sold. Get your finances in order, get any dead weight off of the books, and liquidate old assets. Another important action is to have an independent business valuation from a business broker who can give you an unbiased appraisal and help you sell it.
Finally, speak to an experienced estate-planning attorney to help you tie all the loose ends together.
Reference: USA Today (October 24, 2016) “Business owners need extra planning for retirement”