Relying solely on Social Security can leave you wanting; setting up and funding your own retirement account can help you achieve a comfortable retirement.

Approaches to retirement saving among the self-employed cover a wide spectrum. While some have a healthy nest egg, many folks save sporadically or not all. A survey by the Transamerica Center for Retirement Studies shows that 68% of self-employed workers have set money aside for retirement. However, 34% only save from time-to-time and 20% have never saved for retirement.

Why business owners put off retirement savings

There’s no single reason business owners opt not to plan for retirement, but a Forbes article says many business owners forego retirement savings to invest in the business. These owners believe this will make the business more attractive to prospective buyers in the future.  

Another common reason for not saving is planning to work indefinitely. Many experts advise against this strategy for a variety of reasons, including physical changes, burnout and loss of a key employee.

Some folks who don’t save for retirement are counting on Social Security benefits. Yet those checks may leave them wanting in retirement; the average monthly check in November was $1,710.78. For many, this isn’t enough to cover expenses.

How business owners can save for retirement

Business owners and self-employed people can start or boost their retirement savings by setting up a Simple IRA, a SEP IRA, a traditional IRA, a Roth IRA or Solo 401(k). To figure out which retirement account is best for your situation, consult with your tax advisor or one of schedule an appointment with one of our representatives.

Establishing a retirement account is simple; funding one is more challenging. How much you can put into retirement savings varies by plan, income, and your age. A general rule, though, is to set aside 10% to 15% of your annual earnings. If you like to break big goals into smaller ones, divide your annual goal by your number of paychecks.

Whether you reach your goal in monthly increments or an annual lump sum makes no difference. The important thing is to set aside money for retirement so you can have a comfortable retirement. The sooner you start, the more you’ll benefit from compound interest.

Also, keep in mind that most retirement plans allow contributions for 2023 until April 15, 2024. If you’re just getting started, this means you can put away two years of savings in 2024.

 

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