5 Retirement Plans For Entrepreneurs

Usually, when you start a business, your financial plans center around the building and growth of the company. But you should also consider your future life after business and how you will exit it. There are five kinds of retirement plans you might want to set up that can help you reach your retirement goals.

Investing In A 401k For Single-person Businesses

Most traditional employers offer 401k plans as part of their benefits packages, but freelancers and solo entrepreneurs can also set one up. You would do it similarly to how you might open an IRA with a brokerage, only you would do it using your business.

You just need to be aware of contribution limits which include $19,500 annually for yourself if you’re listed as an employee, a 25% limit of your total compensation, and the overall limit of $57,000 annually. These numbers can change though and you usually are allowed additional contributions if you’re over 50.

Investing In A SEP IRA

A simplified employee pension IRA or SEP as it’s referred to is almost the same as a solo 401k plan, except it can be used by small business owners who have more than one employee working for them. The limits for each employee’s annual contribution are basically the same as the solo 401k with a maximum of $57,000.

A SEP is also similar to a Savings Incentive Match Plan for Employees IRA (SIMPLE), though the SIMPLE is specifically for businesses of 100 or fewer employees, and employers have to make minimum matching contributions to those of their employees.

Investing In Laddered CD Accounts

If you don’t want some of the risks of investing in the stock market or certain ETFs, you might consider opening a CD account. The benefit is you can earn more interest in a short-term CD account than you would in a savings account, and with virtually no risk.

The bad news is you cannot make withdrawals from a CD until it matures. For that reason, you might use a CD ladder where you have certain amounts in short-term accounts and some in long-term accounts. Ultimately though a CD is not the best way to invest long-term or protect your wealth against inflation.

Investing In Annuities

Annuities are other investment accounts you can use which also grow tax-free like IRAs, only they usually don’t have any contribution limits. They are usually invested in through insurance brokers and while they usually start with a lump sum investment, they grow and basically pay you out a certain amount of income each year.

The disadvantages are that investment decisions are usually made almost entirely by the annuity account agent with a few exceptions, and there are a few other drawbacks that can make IRAs preferable to annuities. But there certainly are entrepreneurs who have benefited well from them.

Investing In Personal Self-directed IRAs

If you want real control over the investment decisions you make and don’t want to be limited to buying only securities that a brokerage offers, you could invest in a self-directed IRA.

Some financial institutions and brokerages offer this, but you could also register an LLC for IRA purposes to do this. With a self-directed IRA, you can also invest in hard assets like real estate, and even IRS approved gold or silver. The experts at Goldco state, “With a self-directed IRA, you can invest in real estate, bonds, private businesses, precious metals, and more.

Many Americans can do a 401(k) rollover, which allows them to transfer funds with neither taxes nor penalties to an IRA account. Recently, the volatility of the stock market has drawn many future retirees to execute a gold IRA rollover, protecting their future via the investment security of gold.“

With that being said, if you have an existing IRA or 401k, you can follow a gold IRA rollovers guide to start funding your new IRA. Just remember when you do this that it’s usually up to you to make sure you know the legal process for doing it, and to know the greater financial risks as well.

In conclusion, there are many ways you can have the income you’ve earned as an entrepreneur invested in your future. You just need to know which kinds of investments carry the appropriate risks to your assets, and how much leg work you’re willing to do on your own.