Retirement plans for self employed people are one of the most important issues that people who run their own businesses have. Most do not even realize that their quality of life is going to be impacted by poor planning. They are focused on running their business and building it into a successful operation. They sometimes give very little thought to long-term planning. If we can get even one person to think about their retirement and plan for it, then we have done our job.
Obviously we would like many people who are self employed to embrace retirement planning. In addition, many employees of small companies also do not have company sponsored retirement plans. They must do their own planning as well for their retirement.
Retirement Plans for Self Employed Business People
Many business owners believe that their business will be their retirement plan. They will either sell it or will turn it over to a family member who will run it for them and they will reap the benefits. We hope that this strategy works for everyone. But we also believe that there should be a backup plan just in case the business fails, it does not sell for what you think that it should or it cannot support multiple family members in a life style that everyone would like. Having a backup strategy just makes good business sense and that is why we think that business owners should save for retirement outside of their business operations.
If they are successful in selling their business and have retirement plans set up as well, then this is a total bonus situation. The best of both worlds. If on the other hand their business venture does not turn out as well as they had hoped they still have their retirement savings to live on.
Employees who participate in a company pension plan will receive a pension from their employer when they retire. They may choose to top up their employer sponsored retirement plan to provide them with the quality of life during retirement that they are looking for. Self employed individuals must plan 1005 for their retirement and set aside money that will give them the quality of life they are looking for. They must 100% fund themselves and they must manage their retirement savings to deal with market changes over a period that could be as long as 40 years in some cases if someone were to begin work at 20 and retire at 60.
Biggest Mistake for Retirement Plans for Self Employed
The biggest mistake that most people make about retirement is that they start saving for retirement much too late. They end up not having enough money to retire in the lifestyle that they had assumed that they would have. There are only so many options when faced with this kind of situation. Either you continue working and work longer than planned, or you reduce your expectations during retirement and do not have the quality of life you had planned.
We mention quality of life several times. For some people this is traveling and vacationing around the world when they retire. For others, living at the cottage and spending time with the family is what is important. Whatever your plan is, we suggest that you take the time to figure out how much money you will need each year to live in the manner you prefer and then ensure that you have a savings plan in place that will allow you to achieve these retirement dreams.
One last point we would like to make. Sometimes unforeseen events come along that prevent us from working as long as we had planned. It could be everything from a failed business to health related issues. In addition to your retirement fund, try to also have an emergency fund set aside to deal with these unforeseen surprises. If you never use the emergency fund, then you will have more for your retirement!