5 Things Entrepreneurs Must Do to Prepare for Retirement - Black Enterprise
Black Enterprise magazine Fall 2019 issue

What’s your retirement plan?

If you’re an employee, you are probably taking advantage of an employer-sponsored retirement plan like a 401(k) or 403 (b). But when you decide to dive into the world of entrepreneurship, you are responsible for funding your own retirement.

Unfortunately, many entrepreneurs are so focused on building their business that they neglect to plan for a secure retirement. This leaves many entrepreneurs woefully unprepared for that day when they want to step away from their business and enjoy their golden years.

No matter where you are on your business journey now is the time to take control of your future so you won’t be left behind.

Here are five ways to prepare for retirement

 

1. Create a Vision of What Retirement Looks Like

Have you thought about your retirement goals yet? Do you know how you want to live during retirement and what type of activities you would like to pursue? Are you seeking to travel the world, relocate to a different city, or start taking the dance and music classes you never had time to do before?

If you haven’t asked yourself these questions yet, now is a good time to start thinking about your life during retirement so you can be intentional about achieving that type of lifestyle.

Grab a piece of paper and write down what retirement means for you. If you’re a visual person, create a vision board and post pictures of your ideal retirement situation. It doesn’t matter if you’re 25 or 45 years old right now, you have to start thinking about your retirement goals or you’ll have to settle for a life that others see fit for you.

2. Know Your Retirement Numbers

When do you want to retire? How much do you need to retire? What expenses will you have?

Most financial experts believe that you should aim to replace 70% to 80% of your pre-retirement income with your retirement savings and income. If you have no idea how much you will need during retirement, you should work with a financial coach who is knowledgeable about retirement to help you create a game plan.

The answers to the questions above will dictate what you can do now to ensure you are financially secure during retirement. Working with a financial coach now will help you determine how much you need to save right now to meet your retirement goals.

3. Set up a Retirement Savings Plan

Setting aside money in a retirement savings plan is key to planning for retirement now. As an entrepreneur, you can look into various tax-advantaged accounts such as the SEP- IRA and the Solo 401(k).

SEP IRA (Simplified Employee Pension) is an individual retirement account for self-employed individuals, freelancers, or small business owners. For 2019, business owners can contribute up to 25% of income or $56,000, whichever is less. The Solo 401(k), or individual 401(k), is designed for self-employed individuals or sole owners of a business. You can contribute up to $56,000 if you are under age 50. Contribution amounts for both SEP-IRA and Solo (401(k) are based on income and age.

Don’t forget to fund and max out your Roth IRA if you meet the income qualifications so that you can enjoy tax-free money during retirement.

4. Determine What Investments Will Help You Reach Your Goals

Saving for retirement is important but in order to multiply your money and make sure your money is working for you, investing your money is key.

You can invest in traditional stocks, bonds, and mutual funds or you can generate higher returns by investing in alternative asset classes. Speak to a knowledgeable financial coach about your options and resources that will help you make your decision.

5. Work with a CPA or Financial Coach

Focus on doing what you do best and hire other experts who can help you create a better financial future.

Before working with a financial coach, make sure they are knowledgeable in the financial areas that are most important to you. For example, if retirement strategies are important to you right now you should find someone who has a proven track record of providing quality education and insights in that area.

Don’t cut costs in this area. Your money is at stake. Find someone who you trust to help you navigate the process so that you can continue growing your business.