May 2018 Small Business Channel

5 Ways Small Business Owners Can Prepare for Retirement

By Isaac M. O’Bannon, Managing Editor

Preparing financially for retirement can be complicated for anyone, but for small business owners the process often poses even more challenges.

Teachers, police officers, firefighters and other government employees generally receive a pension. The corporate world can offer benefit plans or matching contributions. But entrepreneurs can’t automatically rely on any of those features; instead they have to put saving/investing plans in place for themselves and their employees.

And often, Small Business Owners (“SBOs”) aren’t preparing sufficiently for retirement. A survey of SBOs, conducted by BMO Wealth Man agement, showed 75 percent had less than $100,000 saved for retirement.

“Small business owners have to do it on their own, and many aren’t preparing properly,” says Troy Bender, President and CEO of Asset Retention Insurance Services Inc. (www.asset-retention.com). “Many feel like they will never make it, but they can. The idea is to simply start.”

Bender lists five ways small business owners can wisely plan for retirement, which include:

• Decide how much to save each month.  An ideal average for saving per month is 15 percent of your pay, Bender says. If that seems too much at first, you might ease into it. “To begin, you may start with 5 percent and then ramp up 2 to 3 percent each year,” Bender says. As a better gauge, he says, note that an employee with a 401(k) can contribute up to $18,500 of their salary for 2018 if they’re less than 50 years old. Someone aged  50 and over with a 401(k) can save $24,500 a year. A good goal is to try to match these amounts annually.
• The SEP IRA. As defined by the IRS, a Simplified Employee Pension (SEP) plan provides business owners with a method to contribute toward their employees’ retirement as well as their own retirement savings. “It doesn’t have the start-up and operating costs of a conventional 401(k) or profit-sharing employee plan,” Bender says. ”Your business pays no taxes on annual earnings, as it grows tax-deferred.
• Rule of 100.  “Retirement accounts that offer the highest return may seem ideal, but a business owner who goes down this path can be easily overwhelmed and stressed,” says Bender. “As a business owner, you generally already have enough stress, which can manifest in so many ways. A basic rule to follow is known as the Rule of 100.” Under that rule, you subtract your age from 100, and what’s left over is the percentage of your portfolio you put into investments with some risk. For example, if you are 50, then 50 percent of your assets would be at risk and 50 percent would be allocated conservatively – placed in a bank account, or perhaps in an annuity, for example, to provide income for you in your future.
• Life insurance. A small business owner with a family should have 10 times their annual net income in life insurance. Bender says. “The life insurance can be set up to provide a Tax-Free income in the future, too, that a small business owner can draw from,” Bender says.  
• Key Person Insurance. Like having life insurance to provide financial help for your family when you pass away, a SBO may want to consider “Key Person Insurance.” The death benefit offered through “Key Person Insurance” helps ensure that should a “key person” within a company pass away, there will be continuity of the business for its employees (and customers).

“You need to save for the necessity stream as well as the discretionary stream,” Bender says. “You should get the basics down and really look at covering your lifestyle, so you can look back and smile from the thousands of hours you worked owning a business.” 

Small Business Blogs & Social Media

Entrepreneurship for Superwomen. Bplans blog.
https://bit.ly/2HFNtjT

How Can Small Businesses Find Big Talent? Indeed.com blog.
https://indeedhi.re/2KrnaM6

Marketing in the Age of Alexa. Harvard Business Review.
https://bit.ly/2FaZojx

What Makes Up a Small Biz Credit Report? SBA blog.
https://bit.ly/2I6TeGE

Instagram Tips for Small Businesses. Xero Small Business Guides.
https://bit.ly/2I6zsv6

Small Business News

Is Tax Reform Really Helping Small Businesses? A new study shows that most small business owners don’t understand how the law impacts them.
www.cpapracticeadvisor.com/12409530

Small Business Owners Say Now is Good Time to Grow. Almost 70 percent of small business owners say now is a good time for small businesses to grow.
www.cpapracticeadvisor.com/12409478

Small Business Owners Against Repeal of Net Neutrality. Since 2015, net neutrality rules have required Internet service providers to enable the same level of access to all content applications regardless of the source.
www.cpapracticeadvisor.com/12409081

7 States that Never Recovered from the Great Recession. The last recession in the U.S.. (2008-2010) lasted only two years, but its impact on the U.S. workforce is still being felt.
www.cpapracticeadvisor.com/12409570

Minorities Denied Mortgages at Far Higher Rate. Mortgage applications are denied at the lowest rate in the past 20 years, yet a stark divide remains between potential homebuyers of different racial groups
www.cpapracticeadvisor.com/12409093

Only 32% of Businesses Say They’re Ready for Tax Changes. The U.S. Tax Cuts and Jobs Act of 2017 is now in effect, but its implementation and impact on businesses is just starting to unfold.
www.cpapracticeadvisor.com/12410880