How Busy Small Business Owners

Can Plan for Retirement

If you’re like many small business owners, you pour your heart and soul into running your business—and likely most of your time, too. That dedication is great for your business, but it can make it more difficult to plan and save for retirement, or even to think about a strategy for potentially stepping back from the business one day.

Even if you never want to retire, it’s important to save for the future and plan for a possible business transition.

Don’t Put Off Planning for the Future

It can be tempting to postpone planning for retirement or investing for other long-term goals because your business takes up the bulk of your time and energy. That’s understandable but putting this step at the bottom of your to-do list means you’ll lose valuable time during which your money could be growing. 

Regular Investments Can Grow Over Time

A consistent, steady investment of $200 a month can grow into a nest egg of more than $400,000 over 40 years. 

What if you’re a solo worker working for yourself or through side gigs on your own? You can still set up and save through a SEP IRA, as well as an individual 401(k) or traditional and Roth IRAs.

Understand Your Investment Options

The next question to address is how should you choose the products you invest in for retirement? Asset allocation funds invest in other mutual funds rather than individual stocks and bonds. They offer professional money management in one convenient package and may help you balance risk by using multiple underlying funds to provide diversification.

Two common asset allocation options are risk-based portfolios, in which you choose a fund based on how much risk you want to take, and target-date portfolios, in which you can choose a fund based on the year you will need the money, such as your target retirement date. A target-date fund’s investments become more conservative as the date nears.

When you open your retirement plan, it’s a good idea to set up automatic payments to your accounts. Investing regularly on a schedule can let you buy more shares when prices are lower and fewer shares when prices are high. Just as important, it can help avoid knee-jerk reactions to market volatility.

Build a Business Exit Strategy, Retirement or Not

If you’ll be able to sell your business one day, you may rightly view your business as a retirement asset. Selling the business could help fund your life in retirement or create a nest egg you can pass down to loved ones.

Even so, it’s important to have a plan for exiting your business, whether it’s through a sale or another option. Without a plan, you or your family members may be forced to exit suddenly, possibly selling at a discount. If you’re planning on passing the business down to children or other relatives, it’s still important to build a plan to help make that transition go smoothly.

Don’t Plan on Retiring? Consider This.

Even if you plan to keep working forever, it’s still important to save for retirement. Health or other considerations could force you to stop working. And as the COVID pandemic has shown, events outside your control can upend the trajectory of a whole industry. 

Why is all this planning necessary? Consider what would happen if you’re approached by a possible buyer for your business. How would you react? And what would be the right price for you to be willing to sell? Creating an exit plan in advance can help you shape a thoughtful response to all the possibilities. 

That said, planning your retirement or an exit strategy from your business can be complicated, and the right plan for you will depend on your individual situation and wishes. You don’t have to go it alone; you may want to work with a financial partner. That decision is significant and finding the right one is even more important.

Let’s Work Together for Your Business and Your Future

If you don’t already work with someone, let us help.

Our Business Retirement Specialists are available to answer your questions.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.

Diversification does not assure a profit nor does it protect against loss of principal.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

You could lose money by investing in a mutual fund, even if through your employer's plan or an IRA. An investment in a mutual fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Dollar cost averaging does not ensure a profit or protect against a loss in declining markets. This investment strategy involves continuous investment in securities, regardless of fluctuating price levels. An investor should consider his or her financial ability to continue purchases in periods of low or fluctuating price levels. 

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