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Entrepreneurs have unique considerations when it comes to retirement planning. Wealth Strategist Ben Rizzuto discusses how business owners can get started and stay on track to their long-term savings goals.
For entrepreneurs, a future beyond running a business can seem unimaginable, which can lead people to put off retirement planning. We always hear mañana is the busiest day of the week. It’s one of those things that all of us fall prey to, but entrepreneurs are particularly susceptible.
Entrepreneurs face unique circumstances, including busy schedules and cash flow challenges, that make setting money aside especially important. While retirement planning can seem daunting, it is possible to create an effective plan. Here’s how to get started.
Getting started can be as simple as changing your mindset: Tell yourself retirement matters, and saving is possible. It may also help to remember that the flexibility and independence you enjoy as an entrepreneur may not be possible in retirement – unless you plan for it.
There is a link between what we think and what we do. You already refer to yourself as an “entrepreneur” and perform many of the associated habits; why not do the same when it comes to your finances? In fact, research shows that simply describing yourself as a “saver” or a “planner for my financial future” makes you more likely to adopt the habits associated with the description.1
Those habits are made easier by technology, like automatic deposit and automatic escalation, a feature that automatically increases the amount you put away each year. Left to our own devices, we may be tempted to say, “Well, I’d rather spend my money on this or put the money into the business.” These automatic features allow us to tamp down on our human nature and get over that FOMO [fear of missing out], loss aversion, or whatever may hold us back from doing what we need to do.
The right mindset can help you take an integral step in retirement planning: goal setting. Most entrepreneurs are familiar with short- and long-term business planning; you can apply these strategy skills to retirement planning, too. Consider what you want to achieve in your later years, the finances required to do so, and the short-, mid-, and long-term benchmarks required to keep you on track. For founders, retirement planning often includes succession planning. Selling your business or handing it off will have tax implications and financial considerations that will impact your long-term plan.
Just as business strategies can evolve and change, so can retirement plans. Perhaps you will invest less in retirement some years than others because you invested in your business. And that’s okay. Plans change; we all know that. But it’s better to have some sort of roadmap than to not have one.
Planning ahead has a health benefit, too. Seventy-five percent of people who have a retirement plan in place have less negative stress than those who do not, according to research from Janus Henderson Investors.2
Setting goals may sound simple enough. Determining the best retirement vehicles for achieving them can be challenging. Following are some of the options business owners can choose from:
Successful entrepreneurs are skilled delegators, accustomed to calling on folks with more experience and time than they have for certain tasks. Finding a partner for your retirement strategy makes sense, too. A financial professional can help ensure you are not overconfident or unrealistic and keep you on track to meeting your goals.
One final bit of advice: Don’t beat yourself up if you haven’t started retirement planning yet – that’s a waste of energy. Just remember that there’s no day like today to get started, and every little bit helps.
This article originally appeared in Inc. in December 2023.
The information contained herein is for educational purposes only and should not be construed as financial, legal or tax advice. Circumstances may change over time so it may be appropriate to evaluate strategy with the assistance of a financial professional. Federal and state laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information provided. Janus Henderson does not have information related to and does not review or verify particular financial or tax situations, and is not liable for use of, or any position taken in reliance on, such information.
A retirement account should be considered a long-term investment. Retirement accounts generally have expenses and account fees, which may impact the value of the account. Non-qualified withdrawals may be subject to taxes and penalties. For more detailed information about taxes, consult a tax attorney or accountant for advice.
1 “’Helping’” versus ‘being a helper’: Invoking the self to increase helping in young children.” Bryan, C. J., Master, A., & Walton, G. M. Child Development, 2014.
2 “Study: High Levels of Stress Impacting Financial Advisors and Investors Personally and Professionally.” Financial Planning Association, Janus Henderson Investors, Investopedia. May 2019.