Capital Investment Advisors

How To Plan For Retirement As An Entrepreneur

Every day in the United States, a small percentage of courageous and innovative individuals hop off the corporate carousel and step into the world of entrepreneurship. As an independent business owner, you probably view risk differently than most people. You may even welcome it. Let’s face it, you didn’t choose a traditional career path with a set salary and schedule for the next 30 years. You broke away from the norm to define your own version of success. If you’re one of these special, rare, and unique individuals, shouldn’t your retirement plan be too?

Not really. Early-stage entrepreneurs tend to focus solely on reinvesting back into their business, which makes complete sense. They view a dollar invested into their endeavor as a potentially higher payoff than a dollar sitting in the bank. They also tend to be surrounded by other people with extraordinary ideas and may invest money in new business ventures with Las Vegas-potential odds for returns. In the short term, it seems much more exciting than stocks and bonds. What advantage could there possibly be in using traditional retirement channels to plan for your future?

Because when it comes to retirement, consistent and steady wins the race.

Adopt a Simple Savings Strategy

In my experience, you should take a planned and methodical approach to retirement to ensure you can benefit from your hard work in the future, regardless of what happens to your business. To get started, I suggest the Taxes, Savings, and Life (TSL) Rule, which allocates saving as:

  • 30% taxes
  • 20% savings
  • 50% life

Following this guideline should set you up for long-term success in both business and retirement. You won’t be surprised at tax time; you’ll have money in the bank for retirement and emergencies and you’ll have a life – because everybody deserves one!

Good entrepreneurs understand the principal of the value of time when investing and how a reinvestment into yourself can pay massive dividends in your future. There will never be a shortage of exciting, once-in-a-lifetime business opportunities. Take the time to pay yourself first by putting aside projected taxes and fully funding the traditional retirement channels available to you, including a Roth IRA and your own company’s retirement account.

Build a Team to Support Your Long-Term Success

Now, let’s talk about what happens after you become wildly successful, you’re approaching the sunset of your current endeavor and you’re either looking for your next project or starting to think about retirement.

The major mistake most entrepreneurs make in retirement is they see a sizable lump sum payment come in, and they spend it just as fast as it takes for the money to clear the bank. Don’t do this!

Whether you’re approaching an exit that has a multiple of two, three, five or even 10 times, the basic facts remain the same. As Ben Franklin so eloquently put it, the only things certain in life are death and taxes. To limit your tax exposure and maximize your financial gain, I can’t stress enough the importance of having three key advisors on your team:

1. A trusted financial advisor to orchestrate and execute a well-defined financial plan, specific to your goals.

2. An experienced accountant who understands the tax implications for your exit and retirement plans.

3. A specialized lawyer to establish a well-defined legal framework, including a trust and estate plan, that will ensure your financial success now and in the future – for yourself and potential generations to come.

Follow the TSL rule during your prime earning years, to build a savings-first muscle. Then, organize an advisory team and establish a plan to make your money last and invest it through an income-producing portfolio. Taking these steps now will help you reap the benefits of your hard-earned success through your retirement the smart and sensible way.

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