There are plenty of perks to running your own business. You get to (hopefully) do something you’re passionate about. To a large extent, you get to set your own schedule. All in all, you get to be your own boss. That being said, there are some drawbacks.
One of the drawbacks of being self-employed is not having access to the benefits you would have if you worked for someone else. For example, if you worked for a large company, you’d probably have a 401(k) or maybe a pension. The company may even match your 401(k) contribution. You’d have assistance in saving and planning for retirement. Unfortunately, as a business owner, you don’t get these automatically.
According to a survey published by TD Ameritrade in Businessweek, 40 percent of the United States’ self-employed workers aren’t saving regularly for retirement. This means that some four million individuals are only setting money aside for their golden years on a sporadic basis. What’s worse? The same survey showed that 28 percent of those who are self-employed aren’t saving anything for their retirement.
Why aren’t self-employed individuals, who in order to be successful must be independent and responsible, saving for their retirement? Katie Vliestra, director of government affairs for the National Association of Self-Employed, says, “For the self-employed, there’s very little difference between business operating cash and personal cash.” The self-employed are feeding their profits back into the business or potentially setting that money aside for the business’s lean times rather than their retirement.
If you are self-employed and haven’t been regularly setting aside funds for your senior years, get started soon, if not now. Speaking with an accountant can be a good starting point. You should also consult with a financial planner to find out what your options are, how much money you may need, and how much money you’ll need to start setting aside. One silver lining for the self-employed is that they may be able to count on the sale of the business to help fill their retirement savings account.
In addition to your financial and retirement planning, you should start estate planning as soon as possible. Have you considered what will happen to your business once you are gone? Your business agreements should work smoothly with your estate plan.
Now is the time to plan for your future and the future of your business.