As a business owner, it can be easy to overlook setting aside money for your retirement. When you work for a more traditional employer, you are more likely to have an automatic plan in place. Your employer might even offer a match to help you on your way.
Even if you know that you probably won’t end up with a traditional retirement arrangement, it’s still a good idea to set money aside for the future. You want to make sure you fund your retirement — whatever that looks like.
Tax-Advantaged Retirement Accounts
Even though you might not follow the traditional path, you can still use tax-advantaged accounts to fund your retirement.
As a business owner, you have a few options to take advantage of tax benefits as part of your savings:
- IRA
- SEP IRA
- SIMPLE IRA
- Solo 401(k)
Another account that is often overlooked is the Health Savings Account. I actually use my HSA as a sort of retirement health care account. Even though I can use the money in the account right now to cover some my costs (and I have quite a few now, thanks to a fencing injury), I put it off. I’d rather let the money grow in my account over time. The HSA, if you qualify for the account, provides you with the ability to get a tax deduction now for your contributions, and let the money grow tax-free over time — as long as you withdraw for qualified medical costs.
In some cases, if you have a defined-benefit plan set up for your business, you might see some tax breaks. If you have employees, you might need to provide them with access to the plan you set up for yourself.
Taxable Investment Accounts
You don’t have to confine yourself to tax-advantaged accounts, however. Many of these plans and self-employed retirement options come with restrictions that can be irksome, depending on what you want your retirement to look like. You can actually fund your retirement with taxable investment accounts. If you know you will need access to the money before age 59 1/2, or if you are worried about Required Minimum Distributions, or if you have any other concerns, you can always put some of your money away in taxable investment accounts.
I use taxable investment accounts to help me create a lifestyle that I enjoy today. While I also have tax-advantaged accounts for the future, I also know that there are things I want to do now. As a result, I make it a point to use taxable accounts for things like building up my travel fund and saving for long-term emergencies. That way, I know I have access to the money without having to worry about penalties for early withdrawal.
You can put together your own plan to fund your retirement, using a combination of tax-advantaged and taxable accounts. Consider your needs, and think about what you want your retirement — and even your lifestyle today — to look like. Once you have that down, you can start setting aside money in accounts that make sense for your goals.
