Love The Hustle Blog

Retirement For Small Business Owners: 3 Expert Tips

When it comes to retirement for small business owners, the statistics show that many are woefully underprepared.

Whether you’re a small business owner or the CEO of a large startup, there are some common reasons (and solutions) for this issue. As entrepreneurs, we often have an intense focus on our businesses – we put everything into our company, and make huge sacrifices to ensure its success. Unfortunately, when you’re putting all your effort towards your business, it’s easy to drop the ball for retirement or have slip-ups.

Thankfully, achieving a successful retirement for business owners is achievable with these tips:

Don’t assume you have the winning ticket

While it’s great to be an optimist, you shouldn’t assume your business will be the golden ticket for a worry-free retirement. You (hopefully) wouldn’t invest all your wealth in one stock, yet many entrepreneurs bet all their chips on their own company without blinking an eye.

This flawed line of thinking assumes that just because you’re at the helm, this investment can avoid risk or failure. While I’m certain you have fantastic entrepreneurial skills, the reality is that many business risks are well beyond one person’s control. The assumption that your business will last until your retirement (and that it will completely provide for you financially afterwards) is a very dangerous one to make.

Rather than scrambling to build a nest egg later in life, you should start preparing now. The good news is that if you start early, compound interest will work very hard in your favor. If you consistently invest now, you can focus on your business while this wealth blossoms into a fortune over the long-term.

Balance your risk

Entrepreneurs are usually natural risk-takers. To some degree, you need to have a healthy appetite for risk in order to set up shop. However, problems with retirement for small business owners arise when this propensity for risk-taking crosses into their retirement investing.

Since owning a business already involves financial risk, your investment portfolio should take that into account. Often, entrepreneurs should balance out a risk-heavy business with risk-adverse investments (such as municipal bonds). Instead of following your hunger for risk, you should create a retirement roadmap in light of your unique goals and needs.

It’s also important to draw the line between smart, necessary risk-taking and dangerous decisions. While you need to take on risk in investing to grow your wealth, you shouldn’t attempt to time the market or make concentrated bets. Many business owners mistakenly tend to do the latter because they have a heavy appetite for risk.

Take advantage of tax-advantaged investments

When it comes to retirement for small business owners, many don’t prepare because they lack access to retirement investments that employees at big companies can traditionally take advantage of, such as 401ks.

Just because there is no one is providing you with a 401k, it doesn’t mean you can’t utilize its tax advantages. There are options for self-employed 401ks, and you can also open one for your business.

Additionally, Traditional and Roth IRAs can be opened by business owners, and they also allow for tax-free growth of your wealth. You can view our guide on Roth and Traditional IRAs here to see more about them. 

Learn more about retirement for small business owners

At LexION Capital, we craft bespoke investment solutions that can account for the unique needs and goals of business owners. And as a successful serial entrepreneur myself, I understand and can help with the financial challenges you might face. If you’d like to learn more about how LexION Capital can help you achieve a worry-free retirement, let’s have a conversation today. 

Elle Kaplan
[email protected]