Posted by Steve Beatty on Mon, Jun 13, 2011 @ 06:00 AM
When it comes to my business, I'll do whatever it takes to get the job done...even if that means putting off the very things I most enjoy: a steak on the grill, time spent with family, a walk in the park. Sound familiar?
Yet, as a business owner, I know that there's one thing I can't put off: my own retirement plan. No corporate office will take care of it. It's up to me to ensure that I have a plan in place to fit my needs and my future. Just like it's up to you.
So how does your business owner retirement plan look these days? If you haven't given it much thought lately, here are a few reasons to take a look.
You Don't Have One
If so, you're not alone. The Small Business Administration's Office reported that only 2% of business-owners had a Keogh (self-employed profit-sharing) plan and only 18% participated in a 401(k) plan. Millions of other business owners don't have anything in place at all. While the idea of setting up a plan, let alone funding it, may seem daunting, it's never too late to get started. There are a variety of qualified retirement plans that offer unique tax advantages to the business owner.
You're Planning to Sell
Many business owners assume that by the time they're ready to retire, the sale of their business will provide plenty of income for their golden years. If you made it through the recent recession, you know the value of a business can change drastically...and not in a good way. You may not reap the proceeds that you expect or inflation may take its toll. Whatever the case may be, it's better to hedge your bets by building a second tier of income using a bonafide retirement investment product.
Your Business Isn't What it Used to Be
Owning a business has never been easy, but for some of us, these last few years have been brutal. Maybe your revenue stream makes it difficult to meet current obligations, let alone take on new ones like a retirement vehicle. Consider working with a professional to create a low-cost business owner retirement plan. You may uncover options that have low or non-existent administrative costs that won't negatively impact your bottom-line.
Your Needs Have Changed
If you do have a plan in place, ask yourself: Does it still fit your needs? Have you adjusted your retirement date due to health or financial concerns? Are you now able to offer retirement benefits to your employees? Reviewing an existing plan is a great way to make sure you're on track.
You Aren't Happy With Your Current Plan
There's nothing that says you can't change or expand your current business owner retirement plan. Finding a new broker or adjusting your investment strategy can make you more comfortable and confident, bringing peace of mind about your future. Making even simple changes will let you focus on maintaining your business, not worry that you've made a mistake.
Posted by Steve Beatty on Tue, Apr 12, 2011 @ 11:38 PM
I met with a new client today. Growing company, morale is high, employees are making more and more money. Their 401(k)? Few employees participate despite a generous match.
Why is that? Fear.
Fear that they won't have enough money to pay their bills today. Fear that their account balance might go down. Fear they don't really understand how it works.
The fact is that for a participant, 401(k) plans have never been easier to navigate. Providers are taking away all the excuses. It's the best time ever to make your 401(k) maximum contribution. Why? Here are the top five reasons:
401(k) plans are the best way invented to save money
It is hard to save when you have to write a check and send it to a financial institution. Even money autodesposited has a way of being spent. There is no better way to save than to have money taken off the top, either pre-tax or after-tax through a Roth 401(k). Budgets always seem to adjust and employees amazingly rarely miss money they never had in their pockets.
Target Date Funds make it easy to invest like a pro
Large cap, international, emerging markets. Where should you put your money? The answer is you should have an asset allocation strategy that encompasses many asset classes. That should be more aggressive when you are young; it should get more conservative as you get older. Target date funds are structured in a sophisticated way and are managed to be ideal for how long you have until you reach retirement age. You put your money in one fund, and to quote infomercial giant Ron Popiel, "You set it, and forget it!"
No company is going to guarantee your retirement income
Even if you work for a municipality or large union, there is reason to worry about employment where you are promised pension income for life. How many states and large pension funds have financial trouble? A lot. A better approach is to make a 401(k) maximum contribution and take responsibility for your own retirement.
Saving and investing has become cool
No longer is conspicuous consumption en vogue. Every generation is talking about net worth and fiscal responsibility more than how many expensive watches or purses they own.
Two words: Roth 401(k)
Let's face it--tax rates are going up eventually. To quote Joel Solomon, "Would you rather pay tax on the seed or crop?" The crop is the retirement income you will someday enjoy. If tax rates double to pay off the huge amount of debt the United States owes, as some expect, tax-free could mean $100,000s of extra retirement dollars. That is way more than you couldpossibly save on pre-tax contributions in a traditional 401(k).