There is no question that you love your business. It is your livelihood and your passion and provides for you and your family. It’s also something that you probably devote a lot of time thinking of ways to improve it and raise profits.
Fast forward 20-40 years to your looming retirement. You probably have some grand plans for the days where you don’t have to strap on the tool belt, mix the cake batter or arrange a dozen roses. This could be anything from seeing the world to buying a boat or watching grass grow – it’s your retirement so we won’t judge.
Snap back to the present and your business and the thoughts swirling in your head. Are you preparing yourself for the day you retire or are you banking on Social Security to take care of you? If you answered the latter you should consider looking into retirement plans that are outside of the hands of a government agency and can be taken out of your paycheck pretax. Two of the more common retirement plans for small business owners are the 401(k) and the SIMPLE IRA. Below are definitions of the two plans:
401(K) – A 401(k) is a type of retirement savings account in the United States, which takes its name from subsection 401(k) of the Internal Revenue Code. A contributor can begin to withdraw funds after reaching the age of 59½ years for restrictions before that age. 401(k)s were first widely adopted as retirement plans for American workers, beginning in the 1980s. (Source: Wikipedia)
SIMPLE IRA – A SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) IRA plan offers great advantages for businesses that meet two basic criteria. First, your business must have 100 or fewer employees (who earned $5,000 or more during the preceding calendar year). In addition, you cannot currently have another retirement plan. (Source: Department of Labor)
The US Department of Labor also offers a guide explaining all the options and tax implications for small business owners that is worth taking a look at to help make a decision on retirement options.
What are you going to do when you retire? And are you planning for it now? We’d love to hear in the comments below.
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