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Retirement Plan Options for Business Owners

Posted by: Rod Kurtz on October 19, 2009

As a small business owner, you assume all of the risk for your retirement. Yet you may be so focused on the day-to-day operations of your business that you have not taken the time even to consider your options. However, with proper planning you can turn this challenge into an opportunity.

The first step is to understand the life cycle of your business. In the early stages, when you were focused on survival and then growth, you put most of your profits back into the business. In the later stages, you need to start preparing for retirement by taking profit out of the business and putting it toward your retirement. You can’t count on selling your business, so saving is critical. Fortunately, there are a variety of planning options available to small businesses. Here are a few examples:

1. Defined Benefits Plan. Like a traditional pension, setting up this type of plan will pay you monthly retirement income. You determine the amount of monthly pay and then fund the plan accordingly from your business income. Since this plan has high contribution limits, it is well suited for business owners in high tax brackets who are approaching retirement.

2. Contribution Plan. Business owners also have the option of setting up a 401(k) or SEP-IRA. These plans provide tax-deferred growth but have lower annual contribution limits. Unlike the Defined Benefits Plan, there is no guaranteed monthly income, and returns are based on investment performance.

3. Annuity. An increasingly popular option, annuities can provide tax-deferred growth with no annual contribution limits. Annuities are available with a variety of options including principal protection, lifetime income, and long-term care benefits. Depending on the options you choose, they can combine the best features of defined benefits and contribution plans.

As you can see, there are many planning possibilities for small business owners. It is important to plan early and speak with a qualified professional so that you don’t come up short.

Richard Rubino, JD
Founder and Principal
Rubino & Liang
Newton, Mass.

Reader Comments


October 19, 2009 5:21 PM

Planning for retirement is critical. You need to start early and establish one or more of the vehicles suggested. However, if you have a real business you should be able to sell it. To learn how, go to the free site for tools and actionable information.

If you have something that is completely dependent on you and your performance, it will be much harder to sell.


October 20, 2009 12:58 AM

Hi Richard,

Thanks for sharing such important information!!!

As an small entrepreneurs we don't think on this, but its the most important to save for your retirement & plan accordingly.

Thanks once again.


Mike roth

October 20, 2009 4:46 PM

Careful with annunities. Plan charges can be absurd. A SEP is a great way and if you like to invest try doing it with a online acct. $ 7-10 a trade. Also invest in what you buy for your family or business. Your local utility will grow as the recession ends and many pay 6-8% now. You know tech will come back as China expands and then the US.Remenber gasoline at $ 4.00 plus. It will happen again. Your family grocery likes, buy their stock, we all have to eat and 10 years from now, another billion people on the planet. Be hopefull even though it is hard now because the republicans and democrats will continue to screw with us. America will grow again in spite of these fools and crooks on Wall Street. If you are still in your 30s and 40's buy term insurance and protect your kid's future. Also if you support those in need or a charity, it really does come back 3 fold. Try it!

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