How to Plan for Retirement as an Independent Entrepreneur.

Studies show that a good number of entrepreneurs are underprepared for retirement and say that retirement planning is very important.

Retirement is an exit plan for employed and self-employed individuals. Nobody wants to work forever. Therefore, everyone needs to save for retirement.

It’s however easier for employed individuals to plan for retirement. Among the many benefits that come alongside having a traditional job, come retirement benefits.

Most employers provide retirement plans for their employees which allows employees to contribute a specific amount of money for retirement. You can either sign up or be enrolled automatically by your employer.

 When it comes to retirement planning, entrepreneurs have to do the work by themselves. As an independent entrepreneur, you have to decide and create your own plan. This obviously calls for discipline, sacrifice, and commitment.

According to CNBC, it’s hard to save when you own a business and the reasons vary from entrepreneur to entrepreneur.

Some don’t have the profits to save for retirement. Others plan to finance their retirement by selling their business when the time comes. Others don’t have a plan to retire and others just don’t see the need to save up for retirement.

Even with all these reasons, it’s important for entrepreneurs to think about their retirement and plan for it.

If you already have a retirement fund in place, that’s good. All you need to do is maximize it as time goes and make this investment last you through retirement.

If you don’t have a plan yet, it doesn’t mean you are behind the game. You can start now regardless of the stage you are in self-employment.

1.Pick a plan.

There are so many retirement plans out there and they can be confusing and you might find it difficult to choose the right one for you.

As an entrepreneur, consider opening an individual tax-advantaged retirement account. Set a monthly amount from your income and put it in your retirement account. Having a monthly amount makes it easier for you to calculate it alongside your other monthly expenses in your budget.

You can open your Individual Retirement Account commonly known as IRA in a bank, a credit union among other investment institutions.

There are several IRA plans and Individual Pension Plans (IPP) and you can choose the right one for entrepreneurs depending on your earnings.

Visit a financial institution and let them breakdown their IRA or IPPs for you and advise you on the best fit for you.

To make it easier for you to deposit your monthly amount to your IRA, make the transfers automatic. Once it’s automatic, deposits are transferred to your account without you even thinking about it.

2.Figure out how much money you need to save.

You need to know what you are working towards. This is highly influenced by how you want to live your life when you retire and what you want to do.

With your picture in mind, you will be able to figure out how much money you need and this will in turn help you figure out how much money you will be setting apart for contributions.

At the beginning of your business, you might not be able to make large contributions towards your account.

You are still working towards getting your business off the ground, running it, and growing it.

You might not be able to know how much you really need for retirement but there are retirement calculators to help you figure that out.

Go online and check out retirement calculators or consult a financial advisor to help you figure out how much you need to be setting aside.

You might personally decide to be contributing 1%, 5%, etc. of your monthly business revenue.

Don’t use not having enough profits as an excuse to not save up. The important thing is getting started even with the little you can set aside. The earlier you start saving for your retirement, the better.

3.Increase your contributions as your business grows.

Over time, work towards increasing your retirement contributions as your business grows.

Don’t be stuck into making the same little contributions all the time. You will not grow your retirement savings that way. The more you contribute, the more you will have when you retire.

Mark your business growth and increase your contributions as your business grows. That means you have to work towards increasing your customer base to increase your income and in turn increase your retirement contributions.

Think of when you will need the money – when do you want to retire? – 10, 20, 30, 40 years from now? What do you want to accomplish with this money? With the end picture in mind, you will realize your goal is big and needs as much as it can to make it happen.

Remember to make your contributions automatic to avoid missing any deposits. Consider having the deposits transferred from your checking account automatically each month.

As your business grows, increase your automatic deposits.

4.Think about lifestyle changes and determine what will replace your enterprise.

Remember your bigger picture, retiring well and comfortably? Experts say retirement is not just about the money and there is more to it.

Think of this, what will you be doing once you retire? What will replace your enterprise and keep you sane as a person?

Your lifestyle is going to change once you retire and you will need something to fill in the time your enterprise fills right now.

Several studies such as a study by the Institute of Economic Affairs shows retirement can be bad for your health generally especially your mental health.

You currently have something you enjoy doing and one that gives you motivation in life – your business. But, when you retire, it won’t be there and you need to figure out something as motivational and worthwhile to replace your business.

Many entrepreneurs love having something to do for themselves and keep them busy and productive. And they carry this along to retirement.

Just think of what you would love to do after retirement to replace your business. It could be traveling the world, involving yourself in new interests, maybe to some extent staying involved with your business, etc.

So, as you plan for retirement, plan and prepare for the lifestyle changes that come with it.

Final Thoughts…

No one plans to work forever and we all have an exit idea in mind.

You want to retire at some point and retire well.

As an entrepreneur, you need to put in more effort into your retirement, set up retirement savings on your own, and keep stocking it with cash.

Set goals on how much you want to put aside from your profits. You can start with as little as 1% and as time goes by increase the percentage. Be disciplined and be committed to the savings plan you come up with.

As you run your business, as you increase your revenue and handle your daily business tasks, don’t neglect your future.

Your retirement is in your hands, you are the one to determine how you will retire.

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