Are you hoping to retire happy? For the self employed, retirement saving options are a little different, compared to what employees are used to.
Small business owners have to tackle retirement all on their own, as opposed to having the boss handle all contributions to a 401(k).
More and more people are making the transition to working for themselves, because of the many advantages and the freedom to be your own boss. However, not everything is all rainbows and unicorns, especially when it comes to handling your own finances.
Back in the old days, retirement possibilities were much more limited. Now, the financial world is your oyster. Sort of.
While all of this might seem overwhelming, especially for entrepreneurs just starting out, there are a few ways to handle savings for your retirement fund, without having to sacrifice your sanity!
Retirement saving options for the self employed
Choose a retirement plan
Retirement accounts are a great way to build up your nest egg for retirement! And there are quite a few individual retirement accounts entrepreneurs can opt for.
They all come with advantages and disadvantages, so depending on each individual financial situation, business owners can choose from:
- IRA based plans (traditional IRA , Roth IRA, SEP-IRA, Simple IRA)
- One participant 401(k) plan
- Profit Sharing plan
The sooner you set up a retirement plan, the better. Or, you could set up more than one, if you qualify. Tax accountants could give you a hand, if you’re unsure how to proceed.
Open up a savings account
Say you’re just starting out with your business and don’t have the financial means to set up a retirement account. But a savings account is easy to handle and gives you the possibility to at least start saving up some money today!
Being self employed comes with certain risks. Maybe too many taxes seem to affect your retirement savings, maybe your most important client runs out of money and you’re left with less income.
Regardless of the situation, your retirement savings shouldn’t have to suffer.
By opening up a savings account you could easily make a priority out of saving a certain amount of money each month. Make a budget and see how much you can save. Automate the savings so you won’t feel tempted to spend that money on something else.
Maximize your tax deductions
The less money you spend on taxes, the more you can save!
While taxes are not negotiable, there are still ways you can make the most of being a business owner and maximize your tax deductions to save more money for retirement.
SEP-IRA, Simple IRA and solo 401(k) plans are pretax. This means you can deduct every penny you save for retirement!
Contributions to charity, certain receipts, home office expenses – these are all tax deductible. Meals you have with your clients, car expenses, anything expense that is necessary for your line of work could be deductible.
Of course, taxes are way more complicated that what you’re reading over here, so make sure you consult with a tax professional for more info and help!
Invest in stocks, bonds, gold, etc.
While investing your money isn’t actually saving for retirement, it’s still a great way to help you save more in the long run.
Stocks, bonds, mutual funds, they’re all good investment opportunities that can get you one step closer to having a nice retirement nest egg.
Gold is also a good investment. Gold futures, gold coins, gold bullion, there are advantages to investing in this area too, if you’re interested.
While buying life insurance has it’s pros and cons, if you think you really need it, you could invest your money in a life insurance policy.
The good news is, after you regularly pay your premiums year after year, you could have a nice sum of money to rely on when you retire! Tax free and all for you to enjoy.
The bad news is, life insurance plans might not be worth it. But don’t dismiss the idea just yet, think about it and weigh in your options.
Sell your business
On to more serious decisions regarding retirement.
Would you be willing to part with your business when you decide to retire?
If you decide to start your own business, chances are you’re gonna struggle to make the best out of the entrepreneurship experience, right?
Well, what if you struggle so hard, you build a thriving business, which you can later sell for a very nice profit?
There aren’t many who are willing to sell their business when retiring. It’s heartbreaking and understandable, but if you plan on living a nice life, you could very well sell your business and use the money to fulfill your retirement dreams. Assuming you don’t plan to retire at 99.
Consider moving to a cheaper country
What does retirement look like to you?
For some, retirement plans include moving to a nice, tropical country, sipping cocktails on the beach. Or, retiring to a cheap country, regardless of its location.
If you plan on making the big move, you probably won’t even need to save hundreds of thousands of dollars. Well, it wouldn’t hurt to have saved up more than you’ll ever need (your kids and grand-kids will be grateful, since they’ll probably inherit what’s left!), but in certain countries, you can live like a king for the rest of your life, with little money.
Small village in South Italy are cheap to live in. Spain maybe? Or Portugal.
Moving on to Eastern Europe, did you know many Italians are actually bored of sunny Italy and prefer Romania or Bulgaria as their retirement destination?
Moving a little further to the East, there are also plenty of tropical countries that could ‘adopt’ you as a retiree, like the Philippines.
Haven’t decided what’s your battle plan yet? Well, you’d think there’s still time until you reach that certain age, but the sooner you decide on how you’re going to save up for your retirement, the better!
Compare your retirement options and see which one could benefit you the most.
Have you already started saving for your retirement, as a self employed?
Which financial route did you choose for your future retirement fund?
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