Paul Haarman believes the entrepreneurship journey seems pretty thrilling and enthralling. However, entrepreneurs are not that lucky to enjoy drawing the same sum of money every two weeks or every month. Moreover, there seems to be nobody to keep reminding you that you should start saving for your retirement to secure your financial future. Since it is not possible for you to know. Precisely what your monthly income would be. Things become too complicated for you while managing your finances and planning efficiently for your retirement. Here are a few steps to take to progress smoothly on the road to retirement planning success.
As per https://money.usnews.com, preparing for retirement necessitates prudent investment, consistent saving, and keeping fees and penalties at bay.
Maintain Separate Accounts
If you are running your own business, you need to focus on creating a separate savings account and business checking account. You need to use a credit card exclusively for your business purposes and business expenses. When you are ready with clear and precise numbers regarding your personal accounts and separate personal accounts, it should go a long way in boosting your tax planning process. This could help you in identifying the best uses and stratagems for your money towards retirement planning.
Make Sure that You Have a Budget but a Flexible One
Since you have a volatile income, it is all the more important to have a pre-determined budget. And to know precisely where all your money seems to be going both personally and within the business. Chalk out a specific budget covering the essentials. However, have a flexible budget since you may need to slash expenses for certain discretionary items whenever there is a lean month in business.
Leverage a Retirement Account Meant for Entrepreneurs
There are some special kinds of retirement accounts that have been designed especially for entrepreneurs running small businesses. Solo 401k would be covering a business owner and his wife but with no employees. An entrepreneur could make elective deferrals of a maximum of 100 % of earned income as much as a maximum annual contribution. The maximum sum a self-employed person could be contributing to a solo 401(k) for the year 2019 is $56,000 provided. He is under 50 years of age. Individuals who are 50 or even older have the liberty of adding an additional $6,000 every year in terms of “catch-up” contributions, thus, amounting to $62,000.
A Simplify Employee Pension IRA or SEP IRA is suppose to be a retirement account meant for entrepreneurs. And they could contribute up to 25% of each employee’s salary. The contributions you are making to each and every employee’s SEP-IRA every year should not exceed 25% of compensation ($57,000 for 2020).
A Savings Incentive Match Plan or SIMPLE IRA is suppose to be a retirement plan that has been designed for. And is available to all small businesses that have just 100 or even fewer employees. The employer must consider contributing a matching sum of 3% of compensation or alternatively. A 2% non-elective contribution should be made for each and every eligible employee.
You could seek professional assistance from financial consulting services so that you could do your perfect retirement planning. Because as an entrepreneur you have absolutely nobody to remind you about your retirement planning. Follow the above-mentioned steps and ensure a financially secured future.