Entrepreneurs: A guide to achieving a successful retirement

Sam Watkins 

For those who’ve ventured into the world of business ownership, the path to retirement planning can be intricate and intimidating, often more so than for individuals who have never embarked on such a journey.

Numerous factors demand consideration, including the timing and strategy for diversifying outside one’s business, the ideal retirement age, the decision to sell the business, the selection of suitable retirement investment vehicles and consistency. Nevertheless, with careful planning and guidance, one can craft a retirement blueprint that aligns with their requirements and will secure their retirement.

For many small-business proprietors, the notion of financial independence might seem foreign, as they have wholeheartedly devoted themselves to their business. They recognize that without shouldering the risks of business ownership, they might not enjoy a steady income. Nevertheless, with sound preparation, financial prosperity both during and after business ownership becomes an attainable reality.

What does retirement entail for small-business owners? Retirement for small-business owners often deviates from the norm followed by employees.

Retired employees might reap the benefits of a pension or a company-sponsored retirement plan that they’ve been contributing to over the years. In contrast, many business owners may not be utilizing these types of vehicles. Furthermore, their transition into retirement can be significantly more intricate. Unlike employees who can simply choose a retirement date and give their notice, small-business owners often face a complex decision. They must either sell their business to facilitate their retirement or, at the very least, appoint a successor to manage the business when they step down.

Nevertheless, small-business owners retain control over their retirement destiny, and through prudent investments, diversification beyond their primary business ventures, and the establishment of a financial safety net, they can maximize the fruits of their hard work, leading to a prosperous retirement. With thoughtful planning, retirement becomes a phase marked by financial security and an opportunity to pursue personal passions after years of dedication to their businesses.

However, business owners must first contemplate how they will prepare for retirement. Investing via a retirement plan can offer substantial tax benefits. One of the keys to a successful and secure retirement is consistent early saving, the creation of financial security outside the core business, and the leveraging of compound interest to one’s advantage.

Fortunately, there exists a variety of retirement plans that cater to the unique needs of small-business owners.

At a high level, 401(k) plans present an attractive option for business owners, regardless of whether they have employees. These retirement accounts are common, offering high annual contribution limits and flexibility in terms of plan design. Moreover, the cost of administering a 401(k) has significantly decreased over the years, rendering them an appealing choice for many business owners. They also open doors to substantial tax deductions.

For certain business owners, a Defined Benefit Plan may serve as an good choice, leading to even greater tax deductions. Nonetheless, these plans are intricate and may not be suitable for all types of businesses. Professional guidance is essential, but for some, defined benefit plans prove to be one of the most effective tools for saving on taxes and preparing for retirement.
In addition to a 401(k), business owners may opt for a Traditional or Roth IRA established outside their business. IRAs offer simplicity in setup and funding, but their annual contribution limits are much lower than those of corporate-sponsored retirement plans.

A recurring question is whether to contribute pre-tax or make Roth contributions. There’s no one-size-fits-all solution, given the complexity of the variables involved. Hence, seeking advice for your individual is often the most prudent course of action.

Commence with the End Goal in Mind

A frequent oversight among business owners is the lack of early planning regarding selling their business or exit strategies when the time comes to move on. Whether it involves partnership agreements or positioning the business for external sale, many business decisions should be crafted with the long-term exit plan in view. A substantial windfall upon exiting the business is often the primary means for business owners to attain financial independence, and today’s business choices can wield profound effects on that windfall in the years to come. When that windfall materializes, the question arises: How can it be converted into a sustainable income to support one’s lifestyle?

Be Consistent

In the realm of retirement planning for business owners, consistency is an often underestimated yet vital aspect. Building a robust financial foundation for retirement doesn’t happen overnight; it’s a journey that requires steady and committed efforts. Here’s why being consistent in your approach is essential:

1. Regular Savings: Consistency in savings is the bedrock of a successful retirement plan. Small, consistent contributions made over the years can accumulate into a substantial nest egg. This is particularly true when considering retirement accounts like the 401(k), where systematic contributions can benefit from the power of compound interest.

2. Risk Mitigation: Business ownership comes with its ups and downs, and there might be years when your business performs exceptionally well and others when it faces challenges. By consistently saving and diversifying your investments, you can mitigate the risks associated with these fluctuations. Even during lean years, your retirement plan remains intact, providing you with a safety net.

3. Lifestyle Adjustment: Consistency in your savings approach allows you to gradually adjust your lifestyle and spending habits. A sudden shift from a thriving business to retirement can be jarring, both financially and emotionally. Consistent planning gives you time to adapt to a lifestyle that aligns with your retirement income.

4. Long-Term Goals: Retirement planning isn’t just about the short term; it’s about securing your financial future for decades to come. Being consistent ensures that your retirement savings grow steadily, helping you achieve your long-term goals, whether it’s traveling, pursuing hobbies or ensuring financial security for your family.

All these considerations, from retirement plans and tax advantages to business exits and the handling of windfalls, stand as crucial aspects for business owners to tackle. Consistency paired with aligning oneself with competent, experienced and ethical professionals significantly enhances the likelihood of making optimal decisions at each juncture along the path.


Sam Watkins is the CEO of TrueNorth Wealth and provides comprehensive financial planning to business owners and other high-net-worth individuals.