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Important Tips for Planning Your Retirement as a Business Owner

As a business owner, it’s vital to begin planning for retirement early. Since you run the business, you’re the one who has to take initiative and ensure that you have proper funding for your retirement. Here are some important tips to begin planning for retirement as a new business owner.

Contribute to Retirement Funds Each Payday

It can be difficult to predict your paychecks as a new business owner. Many take home whatever is left after meeting all operational expenses. With a new business, that number can be dreadfully low sometimes. Even if you don’t have much to spare after paying your bills, it’s important to contribute a small amount to your retirement funds. An amount as little as $20 a paycheck will add up, and you can raise that amount when your business takes off and you have more to spare.

Choose a Good Retirement Plan


The type of retirement plan you choose is just as important as the amount you contribute to it. Retirement plans are not ‘one size fits all and you need one that works well for you and your company. Here are some common retirement plans, and the basics of how they work. You can contact a financial planner if you want a professional’s opinion about which retirement plan you should be using.

Traditional IRA

A traditional IRA is a retirement plan that offers a tax deduction each year for contributing to it. As the money in your retirement fund earns interest, it grows tax-free. Once you reach 70 ½ years of age, you have to start making regular withdrawals to avoid tax fees, but you don’t have to make any withdrawals until then.


A 401(k) is the most common type of retirement fund offered by employers. Obviously, as the business owner, you have to set up your own 401(k) plan. Once your business grows to the point when you can offer benefits to full-time employees, a 401(k) is a great choice. A 401(k) has limits for how much you can contribute per year. The maximum is $18,000. However, the maximums change yearly depending on inflation. If you choose only to have a 401(k), and you get to the point where you can afford to contribute above the limits, look into also having an IRA or a traditional IRA.

Roth IRA

Roth IRAs are similar to both a traditional IRA and a 401 (k) in different ways. You can only contribute to a Roth IRA if your modified annual gross income is less than $131,00 as a single tax filer. If you are married and file jointly, your modified AGI must be less than $193,000. Contributions to a Roth IRA won’t earn you any tax breaks, but you can withdraw from the account without paying any taxes on the withdrawal. The major difference between a traditional and Roth IRA is that with a traditional IRA you avoid taxes when you deposit, and with a Roth IRA, you avoid them when you take the money out.

Grow Your Firm

Of course, growing your firm as large as you can while you’re working is a great investment toward your retirement. You might start with one small building on a corner in a bad neighborhood and retire with an entire empire at your feet. You don’t want to spend your life trying to grow your business and make so many mistakes you end up with a dying business that isn’t worth the building it operates out of. You could get to the point where you have people running the business for you, and you spend your golden years collecting paychecks from the company and your retirement funds. Make sure you know the mistakes many people make when growing their firm so you can avoid them early on in your business. There is a fantastic article called, Four Big Mistakes Hurting Your Firm’s Growth by Damian Organi, Fisher Investments. Although the article is targeted to RIAs (Registered Investment Advisors), it’s an important piece for every business owner to read. It can help you realize mistakes that you didn’t even know you were making. If you catch them early, you could avoid any potential disasters in the future.

Live Modestly

One major mistake that many people make is not living modestly, at least for a while. As soon as business booms, many business owners start charging expensive sports cars and big fancy houses. If something goes wrong with the business, they end up losing everything because they can’t make the loan payments. Make sure your new income is steady before you begin splurging. Wait a couple of years and save your money. You might be able to buy that fancy sports car with cash by the time you decide the income is steady enough to start spoiling yourself. There is nothing wrong with rewarding your hard work, but if you do too much too soon, you could end up in serious debt.

You work too hard for too long to not enjoy retirement. Make sure you follow these tips so you can enjoy life after running your business.

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