By Glenn Harper, Julie Smith, and Kristin Taylor
Let’s face it. You’re living the American dream. You have the opportunity to do work you love, create opportunities for others, and live out your mission. You are an entrepreneur.
But being an entrepreneur comes with some unique challenges especially when it comes to retirement. How can you successfully exit the business that you built? Where does the money that you need for your golden years come from?
Building your own business means you are the one who chooses the retirement plan and tax strategy. It can be empowering or overwhelming. The 3 of us had a chance to sit down and come up with 4 strategies that can help entrepreneurs be proactive with retirement and taxes.
Get in control of your spending
Owning your business is different from being a W-2 employee. Every day you wake up in the negative. You have the opportunity to make money and further your goals but it takes action. The first strategy is the simplest: stop spending more money than you make. Remember that American dream you’re living? Most Americans finance it by consistently spending more than they make. They’re never truly moving forward with their goals.
Set a budget for your personal expenses and stick with it. This practice in self discipline will pay off exponentially and enable you to implement other strategies.
Setting your personal budget, sticking to it, and leaving the rest in the business creates opportunities and options for you. For example, you may choose to take advantage of tax savings now, and put your money into a 401k or Roth IRA that you can later use at retirement.
Or you can reinvest that capital into your business. With greater operating capital, you might choose to hire experts and grow your business exponentially, reaping greater returns than putting that money into a 401k or a Roth.
The good news is that there is no right or wrong answer, but you can shorten the learning curve by working with an advisor who can help you make the right choices that steer you toward your goals. Creating the opportunity to choose the best fit for you and your business empowers you.
What does retirement mean to you? Do you plan to step away completely from the business? Are you wanting to consult part time? How much income will you need each month? What age do you want to retire? So many details go into developing a retirement plan and setting yourself up to take advantage of tax savings, now and in the future.
It’s never too early to set goals and develop your plan. A trusted advisor can help you clarify your goals and hold you accountable as the needs of your business change.
Borrow someone else’s brain
It’s easy for entrepreneurs to hang onto their business too tightly. You’ve spent years building your business, and it is part of you. There’s a plethora of knowledge out there, but no one is an expert in everything.
Hire someone to help you get to the next level in your business and plan your exit strategy. You are the expert in your field. You don’t have to be a financial planner, CPA, and advisor too. Do what you do well, and borrow someone else’s brain for what you don’t know. The tax code wasn’t designed to be fair, it’s designed to extract money. It is complex and ever changing. A proactive advisor can help you avoid pitfalls that will cost you money and maximize the tax benefits that are available to you.
Don’t let your business run you. Stop hoping that you can retire and start planning for it now. You can exit successfully with a proactive approach, a clear plan, and trusted advisors who hold you accountable and guide you to your goals.