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Best Tips for Entrepreneur on How to Plan for Retirement

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For the individuals who are self-employed, retirement planning can prove to be a difficult task. This is because most people don’t have access to retirement plans offered to the employed individuals. However, with the help of an experienced Retirement Planner San Diego, it’s just as easy for an entrepreneur to save for retirement as it is for the employed. Most business owners never imagine that there will come a time when they will have to separate themselves from their businesses. A time when they’ll just sit at home and let someone else be in charge of their lifelong creation. Despite this denial, the hard fact is that many entrepreneurs have to deal with retirement when they grow old.

When talking to any retirement planning expert, they will tell you that money is indeed time. The more time you take in thinking about your retirement plan, the more you are losing money and wasting time. The earlier you start saving for retirement, the more you are likely to get when you finally decide to retire. However, as an entrepreneur, you don’t need a 401(k) to have a reliable retirement savings plan.

With the following tips, you will come up with the best savings plan for yourself, and business

  1. Having a tax-advantaged account

If you are an entrepreneur, and you want to start planning for your retirement. The first ultimate step to take would be opening a tax-advantaged account. When considering this type of account, there are four types of tax advantage accounts that an entrepreneur can open:

  • SEP-IRA: Offers up to 25% annual contributions of one’s earnings. When experiencing slow years, clients are given the option of giving smaller contributions. However, if you have employed staff, then the percentage you set for your contributions must match those of the employees. The same doesn’t apply to one-man-staff kind of business. It also offers a very lucrative opportunity to save more if your business is single self-employed.
  • 1 participant 401(k): It works the same way as the standard 401(k) operates. Just that it is targeted for those who are self-employed and have no employed staff. This account benefits the spouse and children of the self-employed entrepreneur. If your business makes over $250,000 in assets, you will be required to file a report every year.
  • Both IRA/Traditional IRA: These two accounts are pretty much the same. The only difference is that both IRA contributions have to be made strictly after tax. However, the withdrawals being made after the customer’s retirement are tax-free. With the traditional IRA contributions being made before tax and are tax deductibles. Traditional IRA will be the best choice for entrepreneurs who see themselves falling in the lower tax bracket. Regardless, the two accounts are very efficient for entrepreneurs.
  • The Defined Benefit and Cash Balance Plan: Compared to the other three accounts, this account allows the entrepreneur to make larger contributions. Hence, one can mega-boast their savings plan during very successful financial years.

After opening one of the above four accounts, the next plan would be to come up with a savings plan and know how much you will be saving annually, monthly or weekly.

  1. Diversifying your portfolio

“Never put all your eggs in one basket.” That’s the logic behind diversifying your portfolio. If you can manage to spread all your assets on different investment ventures effectively, this will give you a much more secure financial freedom in the long run. This means you have to take into consideration other ventures like stocks, bonds and even other businesses that have long-run profitability. Don’t depend entirely on the revenue you will be getting from your business no matter how successful your business is. The older you get, the farther away you should be from cash investments. Instead, start focusing more on stock investments with low risks and stable bonds. The primary objective of diversifying one’s portfolio is to increase potential earnings and reduce volatility in the long run.

  1. Target Date Fund

What exactly are target funds? These are mutual funds which, with time, rebalance your bond and stock investments automatically. The target date is derived from the year in which the client plans to retire. On the target date, the fund manager will rebalance the assets of the account holder. If you have very minimum time and lack the experience of monitoring your investments, then this is the best option you should go for as a strategy for retirement planning.

  1. Revisiting one’s portfolio

Never ignore the importance and value of your asset portfolio. For one, it acts as a living document. It’s very common for the market to experience changes. This means, once in a while, you will experience fluctuations in the market values of the assets in your portfolio. With an experienced retirement planner San Diego, you will be able to make the correct adjustments and be able to utilize any changes being experienced in the market fully.  After making the investment choices, the best strategy is to let the money stay there and start earning you some revenue.

  1. Constantly Saving

One of the money habits that all entrepreneurs are encouraged to have is always to save. Saving, for many years, has proved to be one of the most effective money management habits for those who are self-employed. Savings secure not only your future but also that of your business. Make it your goal to be setting aside a few thousands of dollars annually for your retirement.  These annual contributions might seem small. But in the long run, they will have a significant impact. Of course, savings require making a few sacrifices like forgoing that holiday family trip to Hawaii. However, your family will appreciate in the long run why you opted to take them across the States road trip and not the trip to Honolulu to swim with the dolphins.  It is also important to separate your business account and personal savings account. You will gain more financial control over your assets and business when you completely separate your personal finances and the finances of your business.  If there is a need to make transfers between the two accounts, then it’s best to open the two accounts under one bank to reduce on the transaction charges.  Using one bank also helps in dealing with any inquiry or transaction issue.

Well, being an entrepreneur is very challenging, and saving is one of the biggest challenges faced by self-employed individuals. Many of us tend to see retirement to be far away. However, we forget the fact that each year, we move closer to retirement and its best to start saving earlier that plan.


So, what do you think ?