No matter what entrepreneurship stage you are in, your top priority should care about your retirement. If you already have a retirement fund, think about how to maximize it. The main way to optimize your investments return is to use an income investing approach.
You can create an ideal portfolio by collecting interest from different types of bonds, distributions that come from investments, and cash flow from stock dividends.
Each entrepreneurship stage includes a various list of “to-do’s” concerning the retirement planning. Try your best to follow the tips below to keep yourself on track.
Stage 1: Early Entrepreneurship Stage
This stage may be the most overwhelming, particularly if you have left a traditional workforce career and became self-employed or started to run your own business. Right now, retirement is not your priority, but it’s a high time to consider your options.
Don’t be discouraged by contribution limits. In case you cannot put the cap amount on your retirement account, don’t forego the savings completely. Instead of this, keep focused on saving what you can and when you can.
Money should be automatically withdrawn into your retirement account. It will take the burden from you.
The question isn’t at what age I want to retire, it’s at what income.
Discover more about individual 401(k). You can try this option if you don’t have employees. It is also an ideal account for you in case your spouse wants to contribute to as well. When choosing a Roth plan, you can make a withdrawal without paying taxes once you hit a definite age.
Consider stocks. It is good to invest in your own company. But you should consider other businesses in your industry as well, especially if your property has hard times. You will diversify your assets and your portfolio.
Discuss rolling over previous savings with your financial adviser. After having accumulated your retirement accounts, it can be really hard to roll over your accounts into another self-employed retirement plan. Ask your financial adviser what route should you choose, whether it includes investments or just add it to your current plan.
Stage 2: Entrepreneurship Mid-Stage
If you’ve been employed for over 10-15 years, you might have already made some savings for retirement. Yet, 34% of Americans still haven’t created a retirement savings account. If you are one of them, consider these steps:
Think about an exit strategy. Do you want to work forever? Do you think about selling your business or you’ll pass it to a member of your family? There are many things to keep in mind when looking at your retirement options. You will want to ensure that your business can function and prosper when you don’t take a lead.
Establish the deadline when you would like to retire. It will help you plan accordingly. Review the financial consequences of your exit.
Review your assets. Begin taking note of the assets of your company and how to make them a part of your plan for retirement. Creating a retirement plan can help you optimize your assets and learn how they will turn into a retirement account after you leave business.
Imagine the retirement you want. Would you like to consult people from the same industry? Would you like to travel? Answers to these questions define how to save for a retirement. To get a retirement income, you can keep consulting your company or consider freelancing.
Max out your contribution limits. It is important because you should have some savings. Your contribution limits are defined by the type of your account, but you can try to invest the retirement savings you have already accumulated.
If you have already invested your savings in an account, pay attention to the tax penalties if you decide to make withdrawals beforehand. Read here about tax credits for small businesses.
Stage 3: Late Stage of Entrepreneurship
This stage can be quite scary – what’s next? If you want to pass your business to family members or sell it, you have multiple options. Many people suppose that savings from their business will be enough for the rest of their life, but it is not always like that. By this stage, you will have to eliminate all your personal debts and start calculating how much money you need to retire.
Consider these steps:
- Diversify your investments. It is vital to invest in your company. But it is also essential to diversify your investments. It will make your portfolio much better. Such liquid assets can turn into retirement income.
- Give yourself time to sell your business. You will not save your business overnight. It can require all your time and energy. Start looking for the options of selling your business before reaching retirement. You may not get all the sum for your business at once. Small business owners often get several payments for the business they sell. In such case, consider your investments and portfolio to have enough money for the retirement.
- Boost your retirement savings to 20% or more of your income. Money financial pressures, such as putting your child through college or paying a mortgage, are no longer an issue. Try your best to fill your retirement accounts. Think about investing in stocks. As a rule, such assets stay ahead of inflation and can be enough for your retirement, even if you have got them not long ago.
P.S.: Read how to revitalize your business.