As a business owner, you often become so busy managing everything that you forget to take care of you and your family’s financial future after you retire. You must plan to save and invest so you can continue to maintain the lifestyle you want after retiring. A closer look at what you need to do to lead a comfortable life in your golden years:
Create a Retirement Plan
Setting a realistic retirement goal is the first thing you should do to figure out your savings and investment strategy. Ideally, you should figure out where you want to be at the time of retirement and work backward to know if you are making the right financial decisions. Remember you will spend less on commuting and workplace wardrobe, but you will need to factor in expenses on leisure travel, housing, hobbies, medical care, and inflation to arrive at a figure that will let you retire comfortably. According to some investment advisors, you can plan for a retirement corpus which will let you withdraw five percent every year without running out of money.
How Much Do You Need to Save For Retirement?
According to Forbes, saving 15% of your gross income in a retirement account with tax advantages is a good strategy. If you earn a lot, you can be a super saver, save half of your income, and plan for early retirement. To estimate how much you need to save every month, you can input parameters like annual income, current retirement account balance, target retirement age, expected rate of return, etc., in an online retirement calculator.
Even though social security is important for retirement planning but since the government can make changes, you should rely on your own assets for your retirement years.
Retirement Accounts with Tax Advantages for the Self-Employed
Unlike employees of big organizations who benefit from employer-sponsored retirement plans or even a pension plan, business owners need to create their retirement plans. In addition to the traditional and Roth IRA accounts that anyone in the US can avail of, self-employed people can benefit from the following retirement accounts:
Solo 401(k)/small business 401(k): More extensive and strict rules and paperwork apply for solo401k retirement plans. If you work by yourself, most brokerages will offer you a free account but will charge fees if you have employees. You can choose to access all available investments, a particular mutual fund or ETF family, or a specific set of funds. You can maximize your returns by keeping the fees as low as possible.
SEP IRA: The Self-Employed Pension Plan Individual Retirement Account is ideal for business owners. You can set it up at no cost at any of the larger brokerage houses, and choose from a basket of supported investments. Your contributions need not follow any specific schedule. The contributions are pre-tax, but you will need to pay tax on the withdrawals at the regular income tax rates.
You must start saving for retirement as early as possible so you can achieve your goals comfortably. Devising a good retirement plan and not deviating from it will help you enjoy your retired life the way you wish.