Planning for a comfortable post-career lifestyle means saving money today. These tips for entrepreneurs can guide the way.
The only savings you’ll have for retirement is the money you set aside now.
No, it’s not parental advice but a sound retirement tip from Jay Thomas Scholz, CEO of Scholz and Friends Enlightened Retirement Group.
Are entrepreneurs heeding the “start saving now” call? It’s difficult to assess, according to a recent study from Spark 401k’s Small Business Retirement Planning Index.
More than 60 percent of business owners say they’re confident they’re saving enough for retirement. Still, nearly half are reserving less than 10 percent of their income, and one-quarter aren’t setting aside any funds at all.
Before looking at specific products such as 401(k) accounts and simplified employee pensions, you should recognize that the big picture is crucial. Franchise owners who yearn for a comfortable lifestyle in their golden years are encouraged to do the following:
- Learn the basics. Scholz says working with a certified public accountant or wealth advisor is essential for entrepreneurs who don’t want to worry about depleting their savings once they’ve retired. “I run into people who make a million dollars a year and spend $1.5 million. They are not a good candidate for an easy retirement unless they’re willing to change their approach.” Scholz advises both the spenders and savers to “start early and save often.”
- Prepare for transitions. Life events outside our control can happen at any time, says Valkyrie Lang, a financial services agent at New York Life Insurance. “The economy, a stroke, the death of a close relative, sickness and divorce can devastate a business to the point of bankruptcy. You must have legal safeguards in place to make sure your business can survive.” Lang says many business owners also overlook the need for long-term care insurance. Most couples will need $260,000 in savings for extended health care costs on top of their retirement funds, she says, noting that health insurance and Medicare don’t cover long-term care.
- Look at your personal situation. If a couple works in the business, each must decide how much to contribute, says Paul Herman, a CPA and founder of Herman and Co. in White Plains, New York. Retirement savings must be considered one of the “necessary costs” of doing business. Think of it like rent, insurance and advertising, he says.
John Rampton, founder of a bill-paying company for businesses, sums it up this way: It’s important to strike a balance between investing in your company and investing in your own future.