How to plan for retirement as a small business owner

If you’re a small-business owner, protecting yourself and your business goes beyond securing proper insurance agreements and building an emergency financial cushion — it also means ensuring that your savings will sustain you throughout retirement.

Most people have retirement savings plans sponsored by their company, however, in the absence of such a plan, the process may be more complex. You must determine how to keep your income flowing after retirement or how to capitalize by selling your business and creating a nest egg.

It’s never too early to begin planning for retirement and there are several things you can do as a small-business owner to prepare.

Make saving a priority. As other financial goals or needs arise, saving for retirement may get overlooked. It’s tempting to re-invest a large portion of your profit into your business, but you may regret not socking away more savings for your personal financial security, especially if retirement comes along faster than you expected. If you don’t have a retirement savings plan, consider contributing to an IRA or other qualified investment plan. It’s less tempting to pull money from accounts that are earmarked for a specific goal.

Develop a succession plan. It’s important to think about how to protect the resources you’ve invested into your company and plan for its future. Research the legal procedures for transferring ownership (to a family member or employee). Document in writing who you intend to take over your business after you’ve retired. There may be tax ramifications when you sell or transfer your business, so be aware of these so you can prepare for the financial impact.

Prepare to sell. If you intend to sell your business, be realistic about its value. It’s difficult to consider accepting less than you believe it’s worth, but if you retire in a down market or sooner than you planned, you may need to compromise on an offer. Keep in mind that selling your business may be emotional. Learning about the selling process before you consider offers may make it less stressful and ensure the decisions you make are financially sound.

Retirement can be especially confusing and complicated for small-business owners, so consider working with a professional financial advisor who can help you balance your business needs with your personal ones. Everyone has different priorities and values, but it is up to each individual to prepare for his/her own retirement. The earlier you begin planning, the easier it will be to fulfill your long-term financial goals and avoid difficult trade-offs.


For more information, please contact Michael W. K. Yee at (808) 952-1240.

Advisor is licensed/registered to do business with U.S. residents only in the states of Hawaii. Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients. ©2010 Ameriprise Financial, Inc. All rights reserved.

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