7 Tips for Preparing for an Early Retirement Now

Wednesday, May 18 at 07:50 AM
Category: Business Banking

Along with home ownership, early retirement is a long-held American dream. But in recent years, planning for retirement itself, let alone an early one, isn’t getting any easier. In 1991, half of all American workers planned to retire before they reached the age of 65. Today, that number has plunged to less than 25 percent.

But if you are 10-20 years away from your desired retirement age, there are still some things you can do now as a small business owner to make it easier for you to retire on your terms.

1. Cash Flow Positive? Invest!

If you are new to business ownership, start putting money aside as soon as you have sufficient cash flow to do so (meaning you’re generating enough income to cover your expenses and debts). Start as soon as you can and invest in tax-efficient retirement plans such as a SEP IRA, a SIMPLE-IRA, a traditional 401(k), a Solo 401(k), a traditional IRA or a Roth IRA.

2. Have a Solid Financial Plan and Revisit it Often

Planning on retiring on the earnings from the sale of your business? Is that going to be enough? What happens if market conditions change, or unexpected liabilities or risks occur that threaten the worth of your business?

Just as you need a business plan to steer your business on its course, it’s just as important to have a financial retirement plan that tells you how much you need to set aside for your retirement, independent of your business assets.

Proper planning should take into account tax planning, investments, employee costs (health insurance, wages, benefits), profit-sharing plans, and succession goals. Spend some time with an independent financial advisor now and throughout your business career to constantly and holistically assess and manage business risks and opportunities.

3. Build Your Business as an Asset

Seventy percent of small businesses are run by sole proprietors, but your business is about more than just you. Look for ways to grow it as a sustainable and attractive asset so that it’s profitable even when you are not there – and so that it retains its appeal to potential buyers.

4. Get the Right Health Care Plan – Today!

Don’t wait to see what Medicare will and won’t cover by the time you retire, or you run the risk of spending all your retirement savings on medical bills. Plan now for long-term health care – talk to a trusted insurance broker or check out Healthcare.gov to understand your options.

5. Plan Your Exit Strategy Now

How can you retire without destroying the business you spent a lifetime building? Your business may be your largest asset, and deciding what happens to it can impact your retirement income, your family’s wealth, and the life of the company after your departure. Even if you are only just starting out, you should address these questions now because the future is uncertain. 

6. Keep on Working?

Can’t imagine retiring full time? Know you’re going to need some additional income and benefits after you retire? There are many post-retirement career options to consider, but as more retirees look for part-time or freelance work, it’s going to become an increasingly crowded space – plan ahead now.

Source: U.S. Small Business Administration*

Links marked with * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution. 

Tags: Arvest Biz, Business Banking, Financial Education, Retirement
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