If you are a small business owner it is likely you spend most of your time focused on the day-to-day running of the business; dealing with customers and admin, and taking care of finances. Your own retirement plan may end taking a back seat… but this can be a mistake.
Your pension and retirement plan provide you with a safety net when you retire – and the sooner you start planning, the easier it will be. Here’s everything you need to know about retirement plans for small business owners.
1. Why You Should Set Up A Retirement Plan Now
Living standards and healthcare are constantly improving, and so humans are living much longer. While this is good news for you, it does mean that it is likely you will be retired for quite a while – so it would certainly be handy to have a decent chunk of savings in the bank!
And if you start saving now, you will probably save more money than if you start later. It can also work out cheaper, in a sense; after all, you will need to save less each month if you start saving at 40, rather than 50.
2. How Much You Need To Save For A Comfortable Retirement
When you work out how much you need to save, consider both the annual retirement income in your country and inflation. Inflation is an important factor, especially if you won’t be retiring for a few more decades.
We suggest using a pension calculator to work out how much you would need to save for a happy, comfortable retirement. Once you have done this, you will be able to set clear financial retirement goals.
3. Setting Up The Best Possible Pension
There are a few different ways to fund your retirement. Some popular options include;
SSAS (The Small Self Administered Scheme)
This is a trust-based retirement scheme that allows you to make investments with the money in your pension account. You will also receive tax exemptions, and you can set up SSASs for your employees.
A Pension Mortgage
If you own a property with a mortgage this is a very tax-efficient way of starting a pension. With a pension mortgage you can make payments that are interest only, and once the mortgage term is over, you can pay it off with the tax-free money in your pension.
You can also use property without a mortgage as a form of pension plan. You can sell the property and use the money to retire with (but remember that the property market can be volatile, so this can be risky).
5. SIPPs (Self-Invested Personal Pensions)
This flexible plan allows you to make investments that are permitted by HMRC with your pension funds. This is a great way to increase your pension, but you may need to employ a fund manager to make wise investment decisions for you.
Do you have a retirement plan set up? Are you worried about retirement? Let us know with a comment!