How to Start Retirement Planning For Entrepreneurs

Retirement planning allows business owners to build their companies and their futures simultaneously. As an entrepreneur, you need to begin your retirement planning as soon as possible if you want to create the future you have always wanted for both your business and yourself. Unlike traditional employees, entrepreneurs have to consciously save for retirement. More so, you cannot use the same strategies that many traditional employees use to save.

In this post, you will learn how to start retirement planning for entrepreneurs.

Open A Separate Business Bank Account

To begin planning for retirement as an entrepreneur, open a business bank account. In doing so, you will be able to easily keep your personal and business finances separate. Open up both a checking account and a savings account for your business specifically. Then, you can expedite your tax processes when the time comes. In the state of California, you need to have a separate bank account for doing business. Furthermore, you can easily manage your business finances. With clear financial planning, you can easily determine how much you can save for retirement and in which ways you should do so. Thus, opening a separate business bank account is crucial for retirement planning.

Hire A Financial Advisor

The next crucial step to start retirement planning for entrepreneurs is to hire a financial advisor. Even entrepreneurs who are well versed in the financial aspects of business struggle with self-employed retirement options. For this reason, you need to hire a financial advisor in your local area. According to Griffin Financial LLC, a financial planner in Anaheim CA, “a planner can help determine your asset allocation needs and understand your risk tolerance.” They will assist you in determining whether you should roll over your previous savings or not. If you wish to roll the money that you have in your current retirement account over into a new plan specifically for self-employed individuals, you will need help from a financial advisor.

Choose A Self-Employed Retirement Plan

Your financial advisor can also assist you in choosing an entrepreneur retirement option. While traditional employees save for retirement in conventional 401(k) plans, entrepreneurs have their own classification of 401(k) plans. There are varying laws on entrepreneur 401K plans in states like California and New York. Additionally, there are other options for self-employed individuals to set themselves up for a bright future. One common way that entrepreneurs save is by opening a tax-advantaged account. There are numerous tax-advantaged account options that benefit entrepreneurs. For instance, SEP-IRA is a popular option because it allows you to put 25% of your annual profits into your account. Look into the different self-employed options you have to kickstart your retirement planning.

Increase Automatic Withdrawals Over Time

In order to successfully start retirement planning as an entrepreneur in a city like Anaheim or Silicon Valley, you must also increase automatic withdrawals. Increase your withdrawal amount more and more over time. As your business grows, so will your profits. Thus, you will have more finances available to put away into your savings account as your company expands. During your startup process, put a small amount of money away each month. Make your withdrawals automatic so you cannot be tempted to decrease the amount. Create a timeline that forces you to increase your automatic deduction amounts when you reach certain points in your company’s life-cycle. Then, you will set yourself up to retire happily and financially stable.

Establish An Exit Strategy

Lastly, establish an exit strategy to start retirement planning. Entrepreneurs become business owners who eventually sell or hand down their businesses during retirement. Those who do not create exit strategies end up selling their businesses sporadically due to industry shifts. As a result, they sell their companies for less than they are worth. Or, worse they are unable to sell the business at all. Then, they are left with less in their retirement accounts. By planning out your exit strategy early on in your business endeavors, you can ensure that you earn the maximum amount of finances for retirement.

Entrepreneurs who start retirement planning early on in their self-employed careers succeed in the future. To begin planning, separate your personal and business finances. Then, hire a financial advisor to assist you in making the best decisions for retirement. They can help you choose the best retirement plan for self-employed individuals. Once you set up a plan, set up automatic withdrawals and increase the amount deducted as your business grows. Finally, establish an exit strategy to avoid losing potential income when you retire. Follow these steps to start retirement planning successfully.