|By Rodney Brooks, @Perfiguy, USA TODAY|
Many of us have dreams of leaving the 9-to-5 grind and working for ourselves. And since the 2008 financial crisis, many have done it — even if some didn't really have a choice.
But many of these budding entrepreneurs, and even the people who have owned their businesses for years, are part of a growing problem: They aren't saving for retirement.
Also, 83% of self-employed who said they are saving for retirement said that at some point they needed to stop or cut back on their savings due to various obstacles.
"I think it's a huge problem," says
But entrepreneurs need to balance between investing in the business today and investing in their future financial well-being, says
Piershale agrees. He says when he sits down with clients who own their own businesses, many are not aware of their options or the tax benefits of retirement accounts.
"Often they invest all their profit back in their business," he says. "They look at it as an alternative to a company retirement plan that might be invested in stocks or bonds. But the big danger is if your business s goes under, you would have only
He says the first thing he does for his clients is run a retirement cash flow analysis on financial planning software. That will determine how much money they will need for retirement to live the kind of lifestyle they want. And if they plan on funding their retirement with the sale of their business, he often cautions them.
"In the best-case scenario I tell them to assume no more than half of their income will come from their business," he says. "Then we run a conservative calculation. I always tell them your business is your highest-risk asset. A lot of times familiarity breeds overconfidence."
Here is some advice for entrepreneurs who need to either get started saving or catch up on their retirement savings plans:
1. "First thing is to find a way to save systematically," says
2. Get help if you need it, says
3. Figure out what type of plan works best for you, says Haas. "Review your business situation and the amount you can contribute each month to determine the right type of plan that meets your circumstance," says Haas. "Some plans offer loan features, so there are options available to get funds if you have a setback. And consider the increased contribution amounts, or 'catch-ups' if you are age 50 or older, which are available in several retirement plans today."
4. Reduce debt. "A lot of our clients have aspired to bigger and more expensive lifestyles as they get closer to retirement, says Strubbe. "They need to realize it's time to tighten that up. A lot of our clients start downsizing their homes. It could take a big burden of income needs in retirement."
"Sometimes it's hard," says Strubbe. "Some of the self-employed are scraping to make it by every day. Some think if they haven't saved a million dollars, a planner isn't going to make time for them. But everyone needs the opportunity to get some advice."
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