Small business owners know the value of a solid business plan. Unfortunately, too many of those entrepreneurs neglect to place the same effort in planning for their retirement. Business owners focus so much on growing and maintaining their business, that often their own retirement becomes an afterthought.
According to a recent report conducted by The American College, forty percent of small business owners have no retirement savings or pension plan in place. The study also found that three-fourths of the owners surveyed have no written plan as how they intend to fund their retirement.
“It’s important to have personal retirement savings outside of your business because the value of that business can fluctuate significantly over the years,” said Tim Masset, Regional President of BMO Harris Bank. “Additionally, having a retirement nest egg is important should the unexpected arise, such as major health issues or needing to sell the business sooner than expected.”
The study offered some tips to business owners on how to effectively save for retirement. Owners are encouraged to invest in themselves, not just their business. Also, setting up an IRA and a SEP are effective ways to save money during times of instability. Investments in these plans are a great way to accumulate wealth outside the business.
Business owners are also recommended to consult with financial professionals who specialize in small business, an accountant, a tax specialist and a lawyer. These experts can offer sound advice and provide insight on how to build retirement savings independently of your small business. A financial professional can also help develop a detailed financial retirement plan that outlines your goals and progress.
“Although it’s tempting to concentrate solely on investing in their business,” says Tina DiVito, Head of the BMO Retirement Institute “small business owners owe it to themselves and their family to have personal retirement savings to help ensure a comfortable retirement.”