Planning for Retirement as a Small Business Owner: 5 Things You Need to Know

Running a small business can often feel like a 24/7 job. From managing inventory to handling customer complaints, the responsibilities are endless. But in the midst of all this hustle, it’s crucial for small business owners to plan for their retirement. Unlike traditional employees, small business owners don’t always have the luxury of a company-sponsored retirement plan.

Even if you have a retirement savings plan set up, it is important to have other things in place, so you can continue enjoying the lifestyle you currently have. Most people don’t want to experience a sudden drop in lifestyle when they retire. They want enough money so they can enjoy taking trips, starting new hobbies, and making the most of all the extra time they’ll have. So, what do you need to know to ensure a secure financial future? Let’s dive in.

Planning for Retirement as a Small Business Owner: 5 Things You Need to Know

The Unique Challenges Small Business Owners Face in Retirement Planning

As a small business owner, you have a dual role. Your personal finances and business finances are intricately linked. While this brings about opportunities for wealth creation, it also comes with unique challenges. Without the cushion of a traditional retirement plan, you need to be proactive in securing your financial future. A survey showed that nearly 30% of small business owners had no retirement savings. It’s time to change that statistic.

Why Succession Planning Is Important?

You’ve dedicated years to building your business, and naturally, you want it to continue flourishing even when you step back. This is where succession planning comes into play. It’s the process of identifying and developing potential successors for your business.

Begin by evaluating the current leadership of your business. Who could take the reins? Do they need more training or mentorship? Remember, a smooth transition ensures that your business retains its value, allowing you to leverage it as a significant part of your retirement fund.

5 Key Things To Consider When Saving For Retirement

If you are planning for life after work, or you are thinking of winding down your small business in the next few years, here are five key things you need to consider when saving for retirement.

1. Start Saving Early

The sooner you start saving, the more time your money has to grow. This is the power of compound interest. Begin setting aside a portion of your income for retirement as soon as your business is financially stable. The more money you can save into a retirement fund, the better, but make sure you keep funds aside to help ease any future cash flow problems the business may experience. 

2. Open a Retirement Savings Account

Options like a Solo 401(k) or SEP IRA allow you to save significantly more than a typical IRA. Max out your contributions each year to supercharge your savings.

A solo 401(k) is a good retirement savings option for self-employed individuals or small business owners with no employees other than a spouse. This type of retirement plan allows individuals to contribute both as an employer and as an employee, potentially maximizing their contributions. As the employer, you can contribute up to 25% of your compensation, while as the employee, you can make salary deferral contributions, up to the annual limit set by the IRS. 

One of the key advantages of a solo 401(k) is the ability to make larger contributions compared to other retirement plans like IRAs. Additionally, similar to traditional 401(k)s, the earnings in a solo 401(k) grow tax-free, providing potential for substantial long-term growth. The contribution limit for 2023 is $66,000.

3. Utilize Roth Accounts

Roth accounts are retirement savings options that offer unique advantages. Unlike traditional retirement accounts, money put in Roth accounts comes from after-tax dollars. This means that when you withdraw funds in retirement, you won’t owe any taxes on the earnings or the original contributions. This tax-free growth potential makes Roth accounts an attractive choice for small business owners who expect their income tax rate to be higher in retirement than it is currently. Additionally, Roth accounts offer flexibility when it comes to withdrawals. You can usually withdraw your contributions at any time without penalties or taxes, and qualified distributions of earnings can be taken tax-free once certain criteria are met.

Consider splitting contributions between traditional, pre-tax retirement accounts and Roth accounts to Diversify your tax liability. 

4. Automate Contributions

Set up automatic transfers from your business checking account to your retirement accounts. This “pay yourself first” approach makes saving effortless. Just as you might automate bill payments or payroll for your business, set up automatic transfers to your retirement account. This “set it and forget it” approach ensures that you’re consistently setting aside money for your future, making savings a non-negotiable expense in your monthly budget.

5. Review Asset Allocation Annually

Rebalance your retirement portfolio to keep your asset allocation aligned with your risk tolerance and retirement timeframe. 

Finally, meet with a financial advisor to review your full financial picture and suggest strategies to maximize retirement income. For example, the ePIC Services Company’s management team connects consumers with financial professionals and their guidance can be invaluable.

Planning for retirement and consistently saving will put you on the path to success. Implementing a diversified savings strategy today will pay off when it comes time to sell or exit your business. Stay disciplined and proactive, and your retirement years can be secure and fulfilling. With some dedication now, you can relax and enjoy your later years knowing your finances are in excellent shape.

Retirement Savings Options Tailored for Small Business Owners

Traditional employees often have 401(k)s, but as a small business owner, you have a broader array of options:

  • SEP IRA: Simplified Employee Pension Individual Retirement Arrangements allow business owners to contribute a portion of their profits to their own retirement and to their employees’ retirements.
  • Solo 401(k): This is ideal for business owners with no employees. You can contribute both as an employer and an employee, maximizing your savings.
  • Simple IRA: This is perfect for small businesses with fewer than 100 employees. Both the employer and employee can contribute.
  • Defined Benefit Plan: This is a traditional pension plan where you can determine the amount you want to receive annually during retirement and then work backward to figure out the contributions.

Understanding these options and discussing them with a financial advisor can set you on the right path.

The Role of Insurance and How It Can Secure Your Retirement

Insurance isn’t just about managing risks; it’s a viable tool for retirement planning. Whole life insurance policies can build cash value over time, which you can borrow against or use in retirement. Annuities are another option, offering a guaranteed income stream.

Moreover, if your business is a significant asset, consider getting a life insurance policy that can cover estate taxes upon your demise, ensuring that your heirs won’t have to liquidate the business abruptly.


Running a small business is no small feat. It’s a testament to your passion, resilience, and vision. But while you’re busy building your business, don’t forget to build your retirement nest egg. By understanding the challenges, leveraging your business for retirement, exploring savings options, diversifying your investments, etc., you can ensure a comfortable retirement.

To get started, take a moment to evaluate where you currently stand in your retirement planning. Meet with financial experts who understand the unique needs of business owners. With the right strategy, you can transition from a bustling business owner to a relaxed retiree, enjoying the fruits of your labor.

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A licensed financial advisor, a former bank manager with more than 10 years of experience in financial & global market. Passionate about fitness, businesses, stock trading and investing, the economy and how it impacts our lives.