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Retirement Tips for Small Business Owners: Why Saving Now is Crucial for a Healthy Retirement

Saving for retirement often takes a backseat in your priority-car, as entrepreneurs and small business owners like you have more pressing things to think about. Any extra money made is invested back into the business to help it grow, because your de facto retirement plan is to sell the business, or close down when you’re ready to retire.

Meanwhile, little to no thought is given to actually saving for retirement. There are many factors as to why it’s important to start doing this: to start investing in your retirement savings as soon as you can, even if it’s not high on your priority list.

Why You Should Start Saving for Retirement Now

Most small business owners are not saving for retirement. According to a survey on business owners retirement plans conducted by BMO Wealth Management,

  • 75% of respondents aged 18 – 64 have saved less than $100,000 for retirement
  • 32% of respondents aged 45 – 64 have saved over $100,000 for retirement
  • 11% of respondents aged 45 – 64 have saved more than $500,000 for retirement

75% of small business owners are underprepared for retirement. Which category do you fall into?

How Much is Enough for Retirement?

If you plan to retire on $500,000, here’s an average breakdown of how fast that will be used up. According to that same BMO survey, if you spend an average of $50,000 per year (considered a modest spending amount by many), you have about 12 years before that $500,000 is depleted. 12 years. That’s not a very long retirement, is it? With a number like that, you’d better hope your additional income sources can make up the difference.

In order to sustain a retirement plan of $50,000 per year (from age 64 – 90), you’d need to more than double your nest egg from $500,000 to $1,100,000.

So what are your options? How can you create the ideal retirement plan to create the freedom and wealth you want and deserve?

Retirement Tips For Small Business Owners

Hire a Financial Advisor – Arguably the most important decision you need to make. Because advisors run numbers and understand how to make them work for you, they’re seasoned at finding tailored solutions for individual clients and they’re experts at determining the ideal plan for you and your family. Make sure you do your research, and hire an experienced advisor to create a plan centred around what’s best for you.

Make a Game Plan – Crunch the numbers for your retirement, and make a plan from here. Determine how much you will need to live on, and how much you will need to save in order to make this future a reality. Your advisor can also help craft a personal plan from the numbers and information you provide.

Decide Which Retirement Savings Plans are Right for You – Depending on the type of company you have, your options are varied. Here are six main options to choose from:

  1. Registered Retirement Savings Plan (RRSP)
  2. Tax-Free Saving Account
  3. Non-Registered Accounts
  4. Investment Holding Companies
  5. Group Retirement Savings Plan – An employer-sponsored savings plan
  6. Individual Pension Plans (IPPs)

A Financial Advisor Can Help

An experienced financial advisor is an important addition to any retirement plan, especially one experienced in the matters of small business owners. We can help tailor your retirement plan around you, helping to create the best possible future for you and your family.

An experienced financial advisor can help small business owners through:

  • Tax management strategies
  • Investment strategies
  • Retirement and estate planning strategies
  • Business transition advising
  • Business succession advising
  • Tax planning for sale of the business
  • Navigating conflicted business vision between key employees
  • Letting go of the business

All of these items are potential roadblocks which can hinder small business owners as they seek to move into retirement. This can make your retirement stressful instead of relaxing.

Let an experienced financial advisor guide you through this potentially stressful process. Call Bayview Financial today to find you your ideal path towards retirement.