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6 ways entrepreneurs invest for retirement

Entrepreneurs can easily save for retirement with these effective investment vehicles.

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Starting your own business is a dream come true for so many people today. Many people love the idea of beginning a venture of their own, bringing it to the public, and working hard to make it a going concern.

At the same time, the path to entrepreneurship does not mean forsaking other goals. Like everyone else, business owners must be prepared to retire. They too need to consider what they want to do in retirement, how much they need to fund their lifestyle, and how long they’re going to use the money they’ve saved.

An entrepreneur also needs to think about issues such as how to reduce their overall tax bill. There are many ways to get all of these goals done via careful, thoughtful planning and an understanding of the laws pertaining to retirement in the United States.

Now is the time to know what potential retirement options you have and how to make the most of them.

The Traditional IRA

The IRA or Individual Retirement Account is many things. It’s a tax deduction and a means of saving for retirement. It’s also one of the most popular means of saving for retirement. If you run your own business, this program has certain advantages and certain drawbacks.

The program is designed to be used by anyone of any background. That includes people who have a standard 9-5 job as well as those who rely on varied sources of income to support themselves or even a non-working spouse. As such, it’s an easy-to-use program.

All of your contributions are tax deductible. This applies even if you don’t itemize. You will not be taxed on the income you put into this method. That makes it a good choice if you have a side hustle that brings in a few thousand dollars a year. You’ll also face financial penalties if you need access to the money before you plan to retire.

An Annuity

Although this might not be the best way to secure money, it is a good savings option for any business venture that you plan on starting in the future.

You might not be a great saver. An annuity is an insurance company contract that contractually locks up your savings until you require them.

Your principal and a small return on your investment would be guaranteed while you make payments to the insurance company. The insurance company can provide you with the money you need to get your money flowing again.

Roth IRA

Another option for those in business for themselves is the Roth IRA. The Roth IRA, like the standard IRA, lets you put away funds for your retirement right now. Where the Roth IRA differs is in that you’re putting in funds that have already been taxed.

As a result, you’re not going to be taxed on them once you take them out. This is a good option for the entrepreneur is who relatively young and has enough money so they don’t need the tax deduction. You have lots of time to let the funds accumulate. It’s important to note there are income caps as well as how much you can contribute.

The SEP-IRA

As a business person, you may be in a position to hire people. As an employer, you have certain obligations both to your employees and to your own retirement plans. In that case, it’s well worth investigating what is known as a SEP-IRA. SEP stands for Simplified Employee Pension.

The SEP is about managing many retirement goals for you and for your employees at the same time. You can choose how much to contribute up to a certain amount. However, you must also devote the same percentage to your employee’s retirement accounts.

This can be a complicated process. That’s why it’s best to consult with an expert, especially if you have a lot of employees and a growing business. This is also a flexible option that you can adjust as needed in response to changing business conditions.

If you’re doing well, you can increase the amount of money you’re putting away or reduce if there’s a sudden downturn. That makes it an ideal retirement option that lets you save up for retirement.

A 401(k)

The 401(k) is one form of investing for retirement that has become increasingly popular in the last few decades. That’s because it allows employers and employees to work together to help an employee plan for retirement.

A 401(k) offers the employees tax breaks on their contributions. The employer typically allows the employee to pick from a set series of potential retirement funds. For the entrepreneur with many employees, the use of a 401(k) allows them to offer retirement options.

The employer can also choose to match their employee’s contributions. That’s a great way to attract and keep good talent at a relatively low cost.

The Solo 401(k)

The solo 401(k) is useful if you have a small business. Your savings grow tax-free over time. You can pick from the standard model using pre-tax dollars or go with the already taxed funds via a Roth IRA.

However, you can only use this form of retirement plan if the only people in your business right now are you and a spouse. You can convert it to a standard 401(k) if your business begins to expand and you hire more people.

By far the best advantage of this saving plan is the income caps on your contributions are much higher than a standard IRA.

Entrepreneurs can easily save for retirement with these effective investment vehicles.

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