Illumin Blog

Small Business Owners Need to Retire, Too.

The reality is that retirement is becoming less and less realistic for entrepreneurs as well as traditional employees. So, even if you're starting up a new biz, continue to contribute to your retirement plan.

After all, you started your business to do what you wanted, how you wanted, right? Don't you want to do the same in your retirement?

Low Cost Option for Entrepreneurs

SEP-IRAs are a great way to go for entrepreneurs. A SEP (Simplified Employee Pension) plan allows business owners to contribute up to 25% of gross income to their own or their employee's plan and the cost is lower than traditional retirement plans. Shop around for pricing.

If you're wondering if a SEP is right for you, get in touch with a Financial Planner for guidance. Also, a good resource for finding out more about SEPs is the Department of Labor's website.

If you haven't taken the time to figure out how much you'll need for retirement, go online now to any number of free retirement calculators offered by financial services firms. Here are two that you can check out. New Retirement and Northwestern Mutual.  

Profit Sharing for Small Firms with Employees

 
According to 401K Specialist Sharee Tellerman of Plan Perfect, Inc., "Many small firms find Profit Sharing Plans attractive because they offer considerable flexibility and low administration costs. Plan contributions can be discretionary. Based on each year's results, the company can decide how much or how little to contribute to the plan.   
 
Profit Sharing Plans can allow you to make high contributions in good years and low contributions in bad years. Thus, in a profit sharing plan, the minimum contribution is zero.  The maximum contribution is 25% of eligible payroll.

In summary, Profit Sharing Plans offer greater flexibility, increased tax deductible contributions, and asset protection from creditors, compared to their SEP, SIMPLE or SIMPLE 401k counterparts."

TIP:  Owners can make disproportionate contributions to key people by taking Social Security into Account.
In this economy, you may be pressured to delay saving for your retirement, but don't.

Even saving a little each month can make a big difference in the end.