Retirement might seem like a far off notion to you.
Now, it may be that you are young and more concerned about funding a college savings plan for the kids than a retirement plan, or that you have no real plans on retiring, or whatever the case, but the same inspiration that led you to entrepreneurship should also lead you to planning for retirement – no matter what your age or situation.
Think about it: Why did you start your own business? It is likely because you had an idea for a business that took hold that you could not ignore. But equally, it’s very likely that you chose entrepreneurship because you believe in yourself and you wanted to create something of value that would provide long-term security for yourself and your family.
Consider all of the reasons a retirement plan makes as much sense for you as starting a business did:
It provides financial security: Let’s face it, Social Security is neither a viable retirement option for most people nor a lock to be there 10, 15, or 20 years from now. By the same token, the income generated by your business now may not be the same 10, 15, or 20 years from now.
You create a hedge against both possibilities by starting to fund a retirement plan right now. It is your security against old age and outside risk.
Things change: Maybe right now you have no plans on retiring, or maybe your business income is such that you don’t think you need to worry about retirement income. But if you have been around the small business block a couple of times, you know that one of Buddha’s truths is that everything changes.
- Your business can change
- You might get sick
- You might get bored
- Life happens etc.
Whatever the case, the solution is the same: The funding of a retirement plan now puts you in control.
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Control: Speaking of control, if you are an entrepreneur then you probably like control. Among other reasons, you likely started a business because you wanted to control your career and the type of work you do. You certainly like having control over your schedule. And if all that is true, then it follows again that creating a retirement plan makes sense because it puts you in control of your finances and your future.
Potential age discrimination: If you are a professional, if you sell yourself and your services, one thing you may encounter as you get older – that you may not be aware of now – is age discrimination.
Oh sure, if you are a doctor, patients will appreciate your gray hair. But will your employer? Might they want to replace you with a younger, cheaper, healthier version? Or what if you are a self-employed salesperson? At some point customers may think that someone younger “knows the market better,” or whatever.
Solution? A funded retirement.
Slowing down: The last reason creating a retirement plan now makes sense is you might want to slow down a bit, but not fully retire.
Saving for retirement as soon as possible seems like a simple concept, but many Americans don’t know where to begin. Now that you know why you should start investing in your future, here’s a tip to kick-start your savings.
Use the 50/20/30 rule to budget for retirement
There is certainly no shortage of ways to spend your way. The first step in prioritizing your retirement is budgeting. If you tell your money where to go, you won’t have to wonder where it went.
50 percent of Your Income – Fixed Expenses
These expenses typically don’t vary month to month. For example:
- Transportation, etc.
20 percent of Your Income – Savings and Retirement
Set automatic payments to your savings account each month.
- Building an emergency fund
- Paying down credit card debt
- Retirement – IRA and 401(k)
30 percent of Your Income – Personal Lifestyle Expenses
Eating out for dinner
If you are looking to cut costs, this is the best category to forgo. Try limiting eating out to once or twice a week, going for a run, or bringing coffee from home.
Your business savvy is what helped start your business, now apply that same go-getter mentality to your future self. After all, funding a retirement plan now makes a lot of sense.
About Steve Strauss
Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business Success.© Steven D. Strauss.
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