Just like there are ins and outs of budgeting for a side hustle, it’s the same for budgeting for your retirement if you’re a small business owner. A lot of people believe if you’re self-employed, you don’t get to have the same benefits that employees who work under a company have. While there may be some truth to it, it’s entirely up to the business owner themselves and how they go about planning their retirement. It’s also important to consider how long they’ve been in business and their age.
People under 40 tend to be less likely to have a concrete retirement plan, this includes small business owners. Small business owners also tend to push off retirement, meaning they work much longer compared to those who worked for an employer. There are even some small business owners who just refuse to retire at all, but that’s usually due to their own personal choices. Because everyone should always expect the unexpected, it’s still always best to have a retirement plan. These steps will help any business owner take the right steps for preparing for retirement.
Begin by getting an idea of when you’re hoping to retire
A great place to always start would be figuring out when you’re hoping to retire. But it’s also important to be realistic with yourself. If you’re 25 and you’re hoping to retire by 40, would that actually be realistic for you? You should also think about your current lifestyle, your health, and your family medical history. There always may be a chance that you’re forced to retire early due to health-related reasons and this needs to be put into consideration as well.
Having a retirement goal is going to be able to help you think about how long you’re wanting to work, how long you really can work, how much money you’re hoping to save, and also how much realistically you can save. You should also think about other factors as well that will impact your decision and your goals.
Some of these factors can include how much money you are currently making, how much you can save each month, whether or not you have children (and their expenses), whether you’re in debt and how much needs to be paid off, your general financial health, your physical and mental health, who you take care of, and what the retirement plan is for your spouse. It’s a lot to swallow, but they all need to be kept in mind.
Think of the retirement lifestyle you want to have
What are you picturing for your retirement? Being on a beach sipping on pina Coladas? How about volunteering or working part-time? Maybe travel around the world? Your retirement lifestyle may depend on your current lifestyles, such as your interest, and your financial situation. You can’t exactly picture yourself on a beach somewhere for your retirement if your company files Chapter 11, right?
It’s also important to know that retirement doesn’t automatically mean that you’re leaving your work altogether in the pursuit of relaxation or hobbies. Many people get the idea of retirement all wrong. There are many, especially business owners who will retire but will still stick around to work on their business, whether it be part-time or just watching over the management of the business.
Think of ways you can fund your retirement
Thankfully, there is more than one way to fund a retirement. Depending on where you live, there may be a local government-funded retirement program that you can look into. Just make sure to keep your options open. Many retirees will sell their house, some of the belongings, and just downsize into something much smaller. Selling their house (especially in this market) will allow for additional cash that can then be used to fund the retirement.
Also, if you choose to not fully retire, then you can still earn an income with your small business or even go as far as looking into side hustles. Some business owners will even fund their retirement by selling their business to a third party, but just know this can be risky. Whatever you do, just know that you do have options.
Some other options you can try for funding your retirement could include investing in stocks, real estate, looking into IRAS, or maybe even something such as cryptocurrency. Many younger people are investing in a variety of things nowadays to expand their portfolio, so this could be something that you can look into. While there is the hope of getting a big return, in the long run, the risk of investing is the uncertainty that it can bring.