A countless number of small businesses lack a retirement plan.
This is a startling fact, especially when considering that a retirement plan can help an entrepreneur achieve long-term financial goals, and attract and retain loyal employees.
Running a small business is difficult. As an entrepreneur, you have numerous issues to juggle and may find yourself forced into matters that are beyond your expertise. You are likely to be crunched for time, and may even place some beneficial initiatives on the back burner. Unfortunately, business owners, especially ones with a handful of employees, do not take advantage of the basic retirement plans available to them because of the misconception such plans are complicated and time consuming.
However, retirement investing can be easily understood and administered.
Ask yourself, “Who is saving for my future?” Just like many aspects of your operation, you have to be proactive and save for your own retirement. Small business owners tend to pay themselves last, but I recommend you get into the habit of treating your retirement contributions like a monthly bill and pay yourself first.
Small business retirement plans are an ideal way to save for those golden years. Firstly, contributions for both you and your employees can be a tax deduction for the business. Secondly, contributions can grow tax-deferred until you withdraw your money in the future.
Two effective, and easy to implement, options available to small businesses are the Simplified Employee Pension (SEP) IRA and Savings Incentive Match Plan for Employees (SIMPLE) IRA. Both plans offer low-cost, tax-advantaged retirement savings opportunities for self-employed individuals and small business owners.
A SEP IRA often works well if you are the only employee of the business, or if it is just you and your spouse. A SIMPLE IRA is good for those who want to help not only themselves, but their employees as well.
Additionally, if you have a SEP or SIMPLE plan through your company, you may also invest in your own Traditional or Roth IRA to supplement your retirement savings.
A good retirement plan can make it easier for an entrepreneur to achieve their financial objectives. It can also help attract and retain loyal employees while offering them the potential opportunity to grow their savings tax-deferred and retire comfortably. As Ben Franklin said, “You may delay, but time will not.”
Peter Sweetser is a Retirement Plans Specialist at Fenimore Asset Management headquartered in Cobleskill, N.Y. with a branch office in Albany.
