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How Small Business Owners Prepare for Retirement

How Small Business Owners Prepare for Retirement

Top Three Retirement Tips

Retirement planning is much more rigorous and extensive for small business owners than it is for other workers. As a small business owner, you will not have a previously established retirement plan. Despite the importance of retirement planning, most small business owners are not prepared. A recent study found that 75% of small business owners aged 18 to 64 have less than $100,000 saved for retirement. Follow these tips to make sure you are prepared for retirement.

Plan Early

One of the best ways you can prepare for retirement is to begin the planning process early. As a small business owner, you do not have an employer looking out for your future financial interests, so you are responsible for developing a retirement plan. Educating yourself on different strategies for retirement savings as early as possible will allow you to save more money and reduce your stress when it comes time to retire.

Hire a Financial Adviser

Most small business owners will not know the ins and outs of retirement plans and business exit strategies. Luckily, certified financial planners will. Hiring a financial adviser is a wise move for small business owners to make, because they can help you with a wide range of financial decisions. A savvy financial planner will be able to help you make smart financial moves throughout your career. Additionally, they can help you determine how much money you’ll need for retirement as well as the best savings plan and exit strategy for you.

Develop an Exit Strategy

The key to seamlessly transitioning from a small business owner to a retiree is having a thoroughly planned exit strategy in place. Usually, small business owners invest in a retirement plan for them and their employees or they develop a plan for selling the business at retirement.

The most common types of retirement plans for small business owners include:


The simplified employee pension (SEP) is a retirement plan that is designed specifically for small business employers and self-employed individuals. If your business has employees, an SEP IRA is a fitting plan since it allows your employees to save for retirement as well.


The Savings Incentive Match Plan for Employees (SIMPLE) IRA is a retirement plan that is established by employers. This plan requires employers make either matching or nonelective contributions, and it is a great plan for small businesses with employees.

Solo 401(k)

The Solo 401(k) is designed for self-employed business owners and their spouses. This plan is not suited to businesses with employees.

SIMPLE 401(k)

The SIMPLE 401(k) is designed for businesses with fewer than 100 employees. If you’re looking for a plan that will cover your retirement needs as well as those of your employees, this plan is a viable option.

If you plan on selling your business when you retire, you will need to develop a thorough exit strategy. Small business owners should develop their exit strategies as soon as they possibly can in order to make a seamless transition into retirement. Important aspects of a successful exit strategy include identifying buyers, making sure the business can run without you and having a flexible retirement plan. Discussing exit strategies with your financial adviser will help you be prepared when it comes time to sell your business and retire.

Small business owners need to prepare for their retirements more extensively than other types of employees, since they do not have an employer looking out for their financial interests. This means that you will need to be diligent with all of your financial decisions and begin to plan for your retirement early.

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