Starting early to plan and fund your retirement may allow you to
retire at a younger age and/or with a much larger nest egg than you ever
imagined when you began your small business.
The only
retirement plan that many small business owners have is a hope that they can
sell their business some day for enough money to provide a comfortable
retirement. Unfortunately, this type of planning is loaded with dangers. The sale of
your business may not generate enough funds for retirement for several reasons. There may be no demand for your type of business because of change in technology
or marketplace. The business may be too dependent on your specific skills or
personality to be marketable.
Therefore, in
planning for retirement, you should make effective use of tax deferred
retirement plans in your small business. There are a variety of plans available,
including a regular retirement plan (defined contribution or defined benefit), a
401(k) plan, a simplified employee pension plan (SEP), a SIMPLE IRA plan or an
individual retirement account (IRA). Each of these plans has specific characteristics and
requirements. All need to be carefully studied to determine which one is right for your
business and retirement goals. For a business owner to get a tax deduction, discrimination rules require retirement plans to cover non-owner
employees. Each type of plan has different reporting requirements and the
cost of and time involved in compliance with laws needs to be considered.
To develop
retirement goals and select a plan best suited to meet your goals may require
that you get professional help. CPAs work with small business owners in many
aspects, including retirement planning. Contact a certified public accountant to assist you in
determining your retirement goals and selecting the retirement plan that makes
sense for your particular size and type of business.
