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Guest Article How Small Business Owners Can Take Control of Their Retirement FutureBy Dmitriy Fomichenko, President and Founder of Sense Financial Entrepreneurs are often quite confident when it comes to their business and finances. When it comes to retirement planning, however, many small business owners are not too sure about their future. According to a recent survey by TD Bank, 26 percent of surveyed small business owner are not sure if they will have enough money to live comfortably during retirement. Forty-seven percent of business owners do not even have a plan in place for retirement. As owners of small businesses, often entrepreneurs have little help other than their own effort to handle pressuring tasks for their businesses. Planning for retirement doesn't seem to be a priority when they have bills to pay, orders to fill, and millions of other things to do to keep their business going. The reality is that most business owners will need a retirement plan. By delaying saving for their retirement, business owners are missing out on tax benefits and earning opportunities. How Small Business Owners Can Take Control of Their Retirement Future Research Alternative Retirement Plan Options Many businesses started out as a one-man operation. Without full-time employees, setting up a traditional 401k seems to be a costly venture. However, there are individual retirement plan options that help business owners and their spouse plan for retirement. Most opt for an IRA or Roth IRA account. Business owners without any full-time employees can also choose a Solo 401k plan. With these individual retirement options, often the cost and administrative responsibility are less prohibitive for owners of small businesses and startups. Self-directed options are also available for both the IRA and Solo 401k plans, giving business owners an added perk of being able to direct the investments of their own savings. Maximize Contribution A great incentive of setting up a retirement plan is the potential tax benefits. However, even with a plan in place, business owners will not realize any benefit if they don't contribute to the plan. By setting aside money to make contributions to their IRA or Solo 401k, plan owners can lower their taxable income for the immediate year. All gains and interests from investing money from the plan are also tax-deferred and can grow exponentially over the years without interruption. For those with a Roth account, taxes are paid up front, but in return, all gains and interests will be tax-free. IRA account holders can consider setting up a Roth IRA if they prefer this option. With a Solo 401k, a Roth account is already available within the plan. Invest Wisely and Avoid Excessive Fee If a business owner doesn't start saving early, he or she may still be able to make up for it with wise investment decisions. Unfortunately, many investors leave it all to fund managers and custodians without discussing their needs and financial goals. To grow a healthy retirement fund, small business owners need to actively educate themselves about different investment options. Deciding their goals and risk tolerance and communicating these criteria with their fund managers are the first steps towards successful investments. With a self-directed IRA or Solo 401k, plan owners can even directly invest their funds without going through a fund manager or custodian. Their investment options are not restricted to only stocks and bonds, but can also include alternative options such as real estate, precious metals, private businesses and more. Business owners also need to know the management and investment fee associated with their accounts. Excessive fees can eat away their savings and lower their overall return. With the compounding effect, just lowering costs and fees by a small percentage now can build up a big difference at the time of retirement. Dmitriy Fomichenko is President and Founder of Sense Financial, a leading provider of retirement accounts with "Checkbook Control": the Solo 401k and the Checkbook IRA. To learn more about the Solo 401k plan, please visit sensefinancial.com or email us at info@sensefinancial.com. ### 401khelpcenter.com is not affiliated with the author of this article nor responsible for its content. The opinions expressed here are those of the author and do not necessarily reflect the positions of 401khelpcenter.com. This article is for informational and educational purposes only and doesn't constitute legal, tax or investment advise. | ||||
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