Are your retirement plans in order? If not, we invite you to consider these 4 tips on retirement planning for small business owners:
Don’t Let Your Business Be Your Only Retirement Plan
CNBC reports on a survey with results indicating that 78 percent of the polled business owners had plans to fund their retirement by selling their businesses. This is a risky retirement plan if you’re relying on the sale of your business to provide 100 percent of your retirement funds. What if your business doesn’t sell? What if it sells for far less than the amount of money you need to comfortably retire?
A smarter strategy would be to create some additional retirement funding sources by saving or investing. When it comes time to retire, those additional savings or investments will guarantee that you won’t be desperate and hurting if your business fails or under-produces.
Many entrepreneurs find that relinquishing their business is hard. If you do plan to sell your business to fund part or all of your retirement, be sure to create and follow a succession plan to ensure the eventual transition will be a smooth one.
Understand Your Projected Social Security Benefits
Social security is intended to provide you with needed retirement income. However, you must be aware that it is unlikely for social security to completely cover your retirement expenses. There will almost certainly be a gap between the amount of money you’ll need for living expenses and the amount social security will pay you. Plan accordingly.
Consider Adding Passive Income Streams to Your Business Model
If your business doesn’t already earn you passive income, give some thought to how you could use the business you’ve built to develop passive income streams. For example, if you’ve built a successful textile printing business, your main business model may be selling printed fabrics to fashion or furniture designers. Consider that you could also license your older, no-longer-in-production textile designs to publishers through stock image agencies. This could become a viable source of passive income, which would add to your bottom line without adding a tremendous amount to your workload.
The goal is to discover ways of earning additional money without doing much or any additional work. Passive income streams could help to make your retirement much more comfortable—particularly if your business is one that currently requires your constant participation to keep the revenue flowing in.
Put a Portion of Your Wealth into Liquid Assets
Liquid, easily salable assets are essential to include in your retirement portfolio. Some options include physical gold, silver, foreign currencies and life insurance policies that can be cashed in (Mason Finance has posted a useful reference with more info about how selling life insurance works).
Savings and not-so-liquid investments are typical inclusions in a sound retirement plan. However, they aren’t foolproof. Inflation can decimate the buying power of the money you save. Investments can disappoint or flat-out fail. Diversification of investments is a wise strategy.
It’s beneficial to make sure that you have at least some assets that are easy to trade in for quick cash in case you encounter an emergency in the future. You absolutely do not want all your money tied up in assets that could be time-consuming to sell—like your business or your home.
We hope these 4 tips will be helpful to you as you plan for your future retirement.