If you own your own business, or work for a small business, financial planning for retirement is a little different for you than for workers that are employed by large corporations. I know from personal experience, as I’m sure that you do, there are many, many advantages to owning or working for a small business. Each individual plays a very important role in the success of the company, and are generally treated with much more gratitude and recognition than if they were to work for a company that has 10,000+ employees.
On the same note, there are definitely some disadvantages, too. Many small business owners do not have the luxury of offering all the benefits of a large company, such as continuing education, and health care. This is especially true if all of the employer’s income is generated by one business.
That being said, most people, regardless of who they work for, would like to retire one day. Retirement planning for these small business owners and their employees can get a little complicated.
Here are a few retirement plans that you may be eligible for, if you own, or work for, a small business:
- Keogh Plans, or HR10 plans, are basically the same as 401k plans, but adjusted for self-employed workers, and to ensure that they are not double taxed.
- Simplified Employee Pensions (SEP) are tax-deferred retirement accounts for small businesses. Business owners put money into their employees’ SEP accounts, and the employees have the freedom to choose how to invest that money.
- Savings Incentive Match Plans of Small Employers (SIMPLE) are plans for small businesses in which employees put a portion of their paycheck into an IRA. In addition, the employer makes contributions; but the employee makes the decisions on how to invest the funds, and the IRA can move with them from job to job.
There are simple tools available on the Internet that can assist you with your financial planning for retirement, such as a retirement planning calculator. However, since you are in a unique situation, you should meet with a consultant or company that offers retirement planning services. These professionals can set up an individualized plan for you that will act as a guide to ensure you get the most out of your investments.
Financial planning for retirement can be tricky, but with some good decisions and practical guidance, retirement can come sooner that you think.