Owning a successful is now a part of your dream. For some baby boomers, entrepreneurship is also a part of their retirement. There are studies out that say that baby boomers are twice as likely to plan on starting a business as millennial’s.  The percentage of businesses being started by Americans 55 and older has been increasing steadily.

The problem is that retirement planning is not a priority for many entrepreneurs, and saving for retirement as a small business owner isn’t as simple. This has to be planned by the owner. You have to want to have to start saving and determine how much you need. You have to have a plan.  It wont be as simple as being automatically enrolled in a company 401(k) plan. Here are some of the biggest mistakes entrepreneurs are making when it comes to retirement planning:

 

Not having a plan. It’s takes a lot of time and energy to start and keep a business running. As you may already know, it doesn’t stop at 8 hours a day. About 34 percent of small businesses owners don’t have a retirement or savings plan. Get a plan together so that when you plan to slow down, you have enough money/income to do so

Taking the time to set up a retirement account offers significant benefits. You are able to also get a few tax breaks and the ability to get compound interest working in your favor. You want to start as early as possible, but you also want to be comfortable enough in the amount you are saving so that you can sustain your lifestyle.

Putting every cent back into the business. Entrepreneurs are sometimes hesitant to put their money into retirement accounts because they worry they will lose quick access to the funds if they need them for the business. That’s a mistake. Diversifying your assets can help you to better cope with emergencies and save for the future. A part of your growth will include understanding this. Find a balance. Having a secure future and retirement is just as important. If you dont know where to start, reach out to a financial specialist or an accountant who will be able to help you with this. It will be very helpful in the long run.

 

Thinking that Selling the business is the retirement plan. Most entrepreneurs overestimate the value of their business. We tend to place add on to the price based on person connection. This hinders your ability to sell it when they are ready to retire. It will never happen the way that you expect it. You could be waiting several years to sell your business if it gets sold at all. Just like when you started your business and thought that people would just start buying a product from you. You learned that it would take some work and a bit of money.

You also have to consider that you may not be able to sell your business for enough money to finance decades of retirement.  Understanding the true value of your business and what you will need to retire is something that you should be looking into now. Then you need to factor inflation. While your business might be worth a lot to you because of the time you invested in it, you need to think logically about the pricing.

Not having the business structured properly. Many entrepreneurs start out as sole proprietors and remain sole proprietors. Not structuring it into an LLC can put your personal assets at risk, which can put your retirement at risk. It also limits your ability to grow. Restructuring once you advance beyond the level of foundation should help your growth as well as assure that your personal assets are safe.


Not diversifying. If most of your net worth is invested in the business, you should select low risk investments for money outside the business. You want to have assets that are away from your business. Be contributing to yourself and your retirement. If something happens and you have to shut down the business, you don’t want to have all of your eggs in one basket.

Thinking retirement plans are too complicated. Workers can contribute up to $5,500 per year to a tax-deferred IRA. Business owners also have the opportunity to save up to 25 percent of their compensation or $55,000, whichever is less, in a SEP-IRA in 2018. For example a SEP-IRA is very straightforward and simple. There’s a half-page piece of paper they have to fill out, and once they set it up, it operates like an IRA. It is not complex or time-consuming.

 

Using retirement savings to start a business. Many . Many people take the money that they already saved and use this to start their business. It is VERY risky simply because if the business fails, then not only have you lost money in the business you lost the money that you had saved. This could cause a terrible hardship. If you are to start your business this way, please have a plan, ensure that you are able to put your savings back within 90 days, and try to be sure that it is a sure thing.

 

-TheBlackEnterprise