Retirement Planning for Entrepreneurs

Retirement Planning Options for Entrepreneurs

Retirement is an inevitable event, whether you are an employee or a business owner. Therefore, a visionary individual is the one who prepare well in advance to tackle this inevitable end. While for employees the process is often not complicated because their retirement schemes are often taken care of by the company management, where they work. All they need to do is enroll for a retirement pension program such as 401(k) and the mentioned amount of money would be automatically cut from their paycheck, for the deposit. The system works so efficiently that most of the times the employees don’t even know about the deductions.

Having said that making retirement decisions can be really hard if you are a business owner or self employed. Part of the reason lies in the fact that, as a business owner you’re always occupied with so many other important tasks that planning for the retirement often takes a backseat. However, for a business owner, the responsibility to do so is much greater more than that in the case of employees. Investing your time and money in retirement pension plans can make a lot of sense for a business owner, because usually these plans come with an added advantage of tax exemption.  In the beginning the choices and options may appear overwhelming to you, but once you get familiar with all the different plans and policies, you will be happy that you spent the time to make the right decision.

Let’s have a look at the various options that are available in the market for retirement income plans. The first option among them is simple IRA plans. This is the best option if you are a small business owner and have less than hundred employees, this plan can save you up to $11,500 annually. The best approach that most of the business owners take to get the maximum tax benefits is by enrolling their employees also in this plan as well. However on the downside; you may not avail the benefits of additional plans for retirement. SEP IRA is another retirement option for the business owners as well as their employees. In this plan the contribution amount is up to 25% of the compensation. However, to qualify for 25% contribution, the total amount should be under $ 49000.

Another excellent option for retirement planning is Simple (401 k). Although the plan is quite similar to Simple IRA there is an added advantage of taking loan. The loan can be taken against the balance in the account. This type of provision is not present in simple IRA plans. If you happen to be self employed and you don’t have any employees working for you then single participant (401 k) will be the best option for you. The plan is much better than simple IRA in terms of higher limit for your savings. The limit is up to 16500 annually. To save even more tax in this plan you can opt for making contributions as much as 25% of the compensation, and of course the maximum amount must be less than $49000 to avail 25% contribution.

If the above mentioned plans appear too complicated and inundating to you. You can always take consult a professional tax advisor or an accountant. In fact, it’s always recommended to take the help of a professional to handle these affairs for you.

Believe it or not, your business itself can prove to be the biggest asset for you, for all your retirement needs. The first option that you have is; you can sell your business itself to fund your retirement years. However, if you think that would be a heart wrenching decision for you then try to appoint a competent manger to run the business for you. So that you can sit back and relax in your retirement home while still getting paid from your business. If you are thinking of these options, it’s still wise to invest in one or more retirement investment options mentioned above. This is essential to provide you the security and the insurance that you would need, once the retirement time finally arrives.