If you run your own business, you understand that you have a lot of overhead expenses to consider. You need to purchase equipment that you can use to run your business, you might need to rent or purchase a building out of which you can run your company, and you need to pay for your own health insurance as well as the insurance of any employees you might have. For this reason, there might not be a lot left over at the end of the month, which could make saving for retirement seem like an impossibility. Retirement savings are very important, and you must set yourself up for your golden years.
What are a few of the most important tips you should follow if you want to save for retirement? Take a look at how you can optimize your retirement savings today.
1. Save First, Spend Second
One of the biggest reasons why people at all levels, including self-employed business owners, do not save for retirement is that they focus on spending first and saving second. What most people do is focus on covering all of their overhead expenses now. Then, they simply save what is left over. If this is the approach that you take, you will not have anything left at the end of the month.
Therefore, you should focus on putting money in your retirement account first. Then, spend whatever is left over. That way, you know you contribute to your retirement account every month. If you are looking for a way to make the process easier, you should automate it. That way, you never have to worry about saving money for retirement. It is already done for you.
2. Start Saving Today
Compound interest is one of the most powerful forces in the universe. If you are younger, you have time on your side. You can earn interest on your interest, which can make the process of saving for retirement much easier. If you wait until you are older, you will need to save a significantly larger percentage of your paycheck every month to meet the same goal. Therefore, you should not procrastinate when it comes to your retirement savings. It is something that you should start doing right now.
3. Use an IRA To Help You
Next, you must use an IRA to help you save for retirement. An IRA is an individual retirement account. As a self-employed business owner, you will have multiple retirement plans available that you can use to make it easier to save for retirement. For example, you might be interested in a traditional IRA. Or, you might be interested in a Roth IRA. Both of these plans come with tax advantages. You might be able to save money on your taxes by saving for retirement. You may want to reach out to an accountant to learn more about the details of tax savings associated with an IRA.
4. Purchase, Don’t Rent
Remember that you must diversify your investments if you want to save for retirement. One of the ways to do so is through real estate. Even though you may own your house, you should consider owning the property out of which you run your business as well. Instead of renting a property for your business, you should try to purchase one. Then, make sure you take care of that property. When you are ready to retire, you can sell that property, which could be worth several hundred thousand dollars (or more). Even though it might be less expensive to rent your property upfront, remember that if you own that property, it could be an extra way for you to save for retirement.
5. Use Catch-Up Contributions When You Get Older
As you get older, you might be able to contribute more money to your retirement accounts. Once you reach the age of 50, you might be eligible to go above and beyond the normal limits of an IRA. The exact eligibility requirements of this possibility vary, so you should reach out to a tax professional who can help you. You might be able to save even more money on your taxes by taking advantage of catch-up contributions with your IRA.
6. Use Tax Deductions To Help You
Finally, you need to take advantage of tax deductions that can make it easier for you to save for retirement. It can be very expensive to run a small business, but small business owners are the backbone of the economy. That is why there are a lot of tax deductions that can help you save money that you can then contribute to your retirement accounts.
For example, if you run your own business, you might be able to deduct your business expenses from your taxes. That way, you don’t owe as much money in taxes. There are several common examples of business deductions, including business vehicles, gas, and utilities, that could qualify for tax deductions. Every business is different, and that is why you need to work with a certified accountant who can make sure you claim all the options to which you are entitled. Reach out to a professional who can help you reduce your tax liability. Then, make sure you put those extra savings into your retirement account.
The Bottom Line
Saving for retirement can be a significant challenge. Retirement savings as a self-employed business owner can be an even bigger challenge. That is why it’s important to use these tips and optimize your retirement savings today.
Talk with other agents and brokers about best practices for retirement savings by joining the American Agents Alliance. Members enjoy valuable discounts, including savings to the largest P&C event in the West, and have access to special programs like our exclusive E&O insurance for insurance agents.
Become a member today!
