Retirement Planning: Where are the Entrepreneurs Going Wrong?

Besides everything else, what sets a job holder apart from an entrepreneur is the way the former plans his retirement. While as a job holder you might as well have started planning for your retirement from the first day of your job itself, an entrepreneur doesn’t really do so. While job holders are perhaps planning their retirement savings even before the day they are stepping into office, entrepreneurs are perhaps mulling quick loans online from Lendgreen to fund an immediate addition to their inventory.
Retirement Planning

Entrepreneurs are Not as Serious as Job Holders about their Savings: Why?

Owning a business is an integral part of the American Dream. Baby boomers, especially are more driven than millennials when it comes to concretizing this dream. A Kaufman Foundation report reveals that baby boomers are more likely to mull business ventures than what the millennials are likely to do. Notably, the number of 55+-year old Americans starting a commercial venture of their own is increasing with each passing day. The bad news – however – is the fact that they are not as serious about retirement planning as the job holders are. There are not one but several reasons behind the same. Here’s a look at the same.

Retirement Plans for Entrepreneurs: What Should they Know?

Entrepreneurs are actually more focused on putting back every scent on their business. They are reluctant to invest in a retirement plan because they fear that they will actually lose access to quick funds for their business. Experts have opined that each and every business out there is probably plowing every dollar back in their business. That is tantamount to a major mistake. Diversification of assets is important since it helps businesses deal with future emergencies more efficiently. Plus, there are no savings as well!

Separating your Personal and Business Finances

The very first sagacious step towards planning your retirement is to separate your business accounts from your personal ones. Your business checking and savings account should only be used to meet your business expenses. Having separate business and personal accounts will also help you with better tax planning. Entrepreneurs often end up complaining that the retirement plans are too complicated. However, speaking to credentialed financial advisors in Canada can actually go on to help you substantially in this regard. There already are pretty straightforward and simple retirement plans made available for businesses. However, even if you do come across complicated plans your financial advisor can always help you understand the same by simplifying it for you!
Another very identifiable reason as to why entrepreneurs are averse to tax planning is the lack of time. It should not really be forgotten that it actually takes a lot of time to actually get a business running. Unlike an average Canadian job holder, who dedicates around seven to eight hours every day in office, an entrepreneur ends up spending almost double that time (if not more) for his business. Needless to say, retirement planning ends up taking a backseat in the midst of such hectic schedule.

You Retirement Planning Needs you to Invest Time!

To beat the time constraint as an entrepreneur you can easily plan to eke out an hour or two each week to plan and then set up a retirement account. Sure you wouldn’t really be getting as much time to plan your account as the job holders out there but you can still make the most of the available time you have by prioritizing the most significant aspects of retirement planning including tax breaks, compound interests and wealth-building opportunities. If your business makes for a significant part of your net worth then you should ideally choose low-risk investments for money, which is in no way connected to your business. Your business should never be the sole part of your retirement plan. Contribute your own personal savings to your retirement plan as well.
The lack of proper business structure can actually put your retirement at risk as well. As per the experts, most of the businesses that start out as sole proprietors choose to stay as sole proprietors. Your choice not to structure your business into an LLC puts your personal assets at risk. This, in turn, puts your retirement at risk as well.

7 Shortcuts for a Simple Retirement Plan in Record Time

Smart professionals often do two things very well:
First, they identify investment opportunities that can get them quick and fruitful results, early in their careers.
Second, they carefully invest in a lucrative and risk-free pension plans to ensure a happy and stress-free post-retirement life.
But that’s just part of the story…
Retirement planning is a complex process and picking the best pension plans from the lot can easily daunt even the most seasoned souls.
Save for Retirement
I’m sure you’re probably wondering:
“Complication isn’t my thing. How do I easily plan a successful retirement and zero in on the best pension plans available in the market?”
Well today I’m going to make it easy for you.
Brace yourself for I’m going to pull the curtains and reveal 7 stupid simple shortcuts for a simple retirement plan in a record time.
So let’s get started! Shall we?
Shortcut #1:

Sketch a Rough Outline of Your Post-Retirement Life

The first step for planning a successful, healthy and happy post retirement life is to figure out how you wish to lead your post-retirement life.
Are you planning to travel across the globe after retirement? Do you wish to stay at your home and enjoy your post-retirement life with your family and loved ones? Or are you planning to pursue a hobby after retirement?
Here’s the deal:
Determining how you plan to spend your days after retirement will help you get a better understanding of how much your retirement will cost you.
Simply stated:
Having a rough outline and iron-clad planning of your post-retirement life will go a long way in ensuring adequate budgeting.
Shortcut #2:

Figure Out When Do You Actually Want to Retirement

Now that you figured out how you plan to spend your post-retirement life, it’s time to determine the time when you will actually retire.
Here’s why:
Determining and calculating the number of years you have in hand before you actually retire will help you get a better understanding of the amount you need to save each year for your post-retirement life.
This will also give you a fair understanding how much your existing savings will continue to grow.
In short:
You’ll not be able to estimate the volume of retirement corpus you need build until you determine when you plan to retire.
Shortcut #3:

Do the Math to Find Out How Much It Will Cost

Now that you have an idea of how you will live your post-retirement life and the age when you’ll retire, it’s time to calculate the savings you’ll need to build your desired retirement corpus.
Start by comparing the best pension plans available in the market to get an idea of the premium you’ll need to pay until you actually retire.
And don’t just stop there:
Take into account your monthly expenses. Include everything right from your expenses on travel and entertainment to your monthly tax liability. Be generous with your estimates and don’t forget to take the inflation rate into account.
You may argue:
Estimates and assumptions will not be accurate. But, they will certainly help you get started with your retirement planning.
Let’s take an example:
Suppose your monthly household expenses are 300,000. You spend almost 80,000 for entertainment and travel each year. Your health care expenses are 60,000 and you end up paying 60,000 in taxes each year.
So you’ll need at least 500,000 every year after your retirement to meet your monthly expenses.
Now, let’s say you’re 40 years old and you plan to retire at an age of 60. This means you have 20 years to retire. Now, add an assumed annual inflation rate to your average monthly expenses. Let’s take the annual inflation rate as 6%.
Your average monthly expenses in next 20 years will be around 1Cr. This means you’ll need to build a retirement corpus of 1 cr.
Shortcut #4:

Start Saving For Your Post-Retirement Life

I’m sure you’ve heard this…
…but let me reiterate.
A penny saved is a penny earned.
Now that you know how much your retirement will cost you, it’s time to start saving and building a retirement corpus.
Take the shortfall estimate from shortcut number 4 and subtract your current savings and pension plan balances to determine your current savings shortfall.
Divide current savings shortfall by the number of years until your expected retirement. Retirement savings shortfall can be made up by saving more or figuring out how to live happily on less– they’re mathematically equivalent.
Shortcut #5:

Be Smart to Keep Growing Your Savings

Well, next step is to mull over investment ideas to grow your savings manifolds.
If only it was that easy…
If you’re serious about ensuring a healthy, happy and financially sound post-retirement life, you’ll need to carefully look for investment avenues to keep growing your savings.
Investing in ULIPs could be your best bet. ULIPs are less prone to market risks and offer comparatively higher returns on investment quickly. Don’t forget to carefully analyse the NAV (Net Asset Value) of the ULIP you intend to invest your savings in.
Yet another reasonable type of investment instruments to look for are ELSS Funds (Equity Linked Saving Schemes). ELSS allows you to earn sizeable profits through investment in equities, while providing you tax benefits at the same time.
These are just two reasonable and easily available investment options to consider if you plan to grow your savings manifolds without having to run from pillar to post and burn the midnight oil.
And that’s not all:
Keep increasing your investments as your income grows.
Shortcut #6:

Keep in Mind Diversification of Investments is The Key to Success

Okay, now you know that ULIPs and ELSS could be your best bet; but don’t just stick to these options like superglue.
Instead, try diversifying your investment portfolio.
Let me explain:
ULIPs and ELSScan help you attain a financially secure post-retirement life, but so can PPF, gold assets and bonds.
Remember:
Don’t hold on to the thought that investing your savings in ULIPs and ELSS will solve all your problems. Instead, hedge your bets by diversifying your investment portfolio.
You’ll need a better and more efficient investment portfolio that includes everything right from ULIPs to gold assets and bonds.
But before you jump the gun:
Be careful to ensure a balanced investment portfolio. Only a balanced investment portfolio can help you realize your post-retirement dreams.
Shortcut #7:

Start As Early As You Can

Early bird catches worm.
This is nowhere truer than in the case of retirement planning.
Wondering why?
This is because the earlier you start saving for your retirement, the more time you’ll get to build a decent retirement corpus.
You get to harness the immense power of compounding when you start saving early.
How early should I start?
The Answer:
Start right from the time, you get your first pay cheque. Simply set aside at least a 10% of the amount for your retirement. And as your income increases, increase the percentage of your retirement fund savings.

Now it’s Your Turn!

So there you have it – 7 stupid simple shortcuts for planning your retirement in record time. Now go ahead, put this learning into practice and ensure a happy, healthy and stress-free post-retirement life.
Best of luck!

Kick Off Your Retirement Savings As Soon As Possible

Whenever you work hard, your paycheck reflects all your accomplishments and achievements. But at the same time, when you have enough money at your disposal, there are also wide array of new things to spend on.
You might be saving dollars for your first home or you may have just signed the agreement for a hefty mortgage loan. You may have one or more babies to provide food and your dog must have been demanding more food.
So , even though your paycheck reflects a hefty amount, there are different areas where you also have to spend money.
There is no doubt about the fact that establishing a family and buying a home is expensive and it is also easy to think that retirement goals is an impossible feat, especially when you’re in your mid-30s.
Hey, breathe easy! You won’t require achieving all your goals at once. But retirement needs to be a top priority. Here are few ways in which you can ramp up your retirement savings account.
Save for Retirement

Accumulate funds in your 401(k) savings account

In an ideal situation, you would definitely want to make maximum yearly contribution to the workplace-sponsored fund, 401(k).
As you keep moving up the ladder of your career, put each of the raise amounts in your retirement savings account and make it a point that you don’t spend them.
In case you think that you can’t afford to rack up all the pay-lifts to your retirement fund, make sure you gradually increase contributions with time.
Don’t hesitate to take an employer match as that is free money which should be given its utmost value.

Maintain a dynamic asset allocation

No, it’s not always enough to save money as you also have to keep a watchful eye on the current retirement assets to make sure you’re not blowing off opportunities for growth.
Invest wisely and strategically, take care of risk by distributing your investment in to various categories like Stocks, Bonds, ETFs, etc.
If you’re in your 30s, you need to invest assertively, thereby saving up to 80% or even 90% of assets to diverse a wide array of stocks.
You have to be diligent enough to save money and invest your dollars in the right things that have a power for growth.

Don’t allow a job change to derail your plan for retirement

In case you’ve been changing jobs for a better opportunity, don’t let it hit your retirement plan. It is seen that often some kind of rich opportunity has the impact of unsettling the savings which you’ve accumulated till date.
Most often, this occurs when people make the wrong decision of cashing out a 401(k) instead of letting it intact.
As per Hewitt, 50% of the workers in their mid-30s cash out their 401(k) accounts when they take a decision to leave jobs. Another retirement trap to steer clear from is bad timing.

Prepare yourself for your kid’s college expenses

Once you’re done with focusing on your retirement accounts, it’s time for you to focus on few other vital expenses as well.
If you have small babies at home, it’s time you start thinking about their college expenses.
You might thing that this is too early to plan for their college but the truth is that the earlier, the better.
If you’re determined to assist your kid with his education so that he never faces any kind of financial issue, you should start saving for his high school and college.
There are several tax-advantaged programs which have been designed for such purposes.
Therefore, if you’re thinking of how you can start saving for your retirement while you’re in your mid-30s, you can take into account the above mentioned tips and advices.
This was a guest post from SB @ onecentatatime.com! SB is an informed husband and father with dexterity for investing and passion for finance. His blog has over an impressive repertoire for those interested in making money, savings, investing, and family.

Save for Retirement Through These Key Channels

Preparing for retirement is something that almost everyone worries about, but a lot of people aren’t saving enough. For some, it’s not possible to save or invest enough money for their future, but others just leave it too late. You need to start thinking about your retirement savings as soon as possible to ensure that you’ll have enough to live on. By the time you retire, the cost of living may have risen, and you could have put away much less than you need to retire for 20 years or more. If you’re making a plan for retirement, think about these ways in which you can save and invest to ensure you have adequate funds for the future.

Save for Retirement

Pensions

Most countries have a pension system of some sort, whether they’re completely voluntary or have a compulsory element. But how well do you know yours, and are you using it to the best of your ability? For example, in Australia, many Australians aren’t putting enough into their superannuation funds. They should be contributing more than the minimum required. And they should perhaps even be using a service like Blueprint Wealth Self Managed Super Funds to take more control over their investments. You should make sure that you’re taking an active role when it comes to your pension and retirement investments, not just leaving it to do its own thing.

Extra Savings

On top of your official pension plan, there are other ways to invest too. You can look at the different types of savings and investment accounts available to you for retirement. There may be a limit on how much you can save each year without having to pay any tax on your savings. As well as collecting interest through savings accounts, you can, of course, save money in your usual bank account too.

Buying Property

If you want to invest in something more physical, one of the most popular assets is property. Whether you buy your own home or purchase property to lease to others, it’s one of the best ways to secure your future. When you retire, you can live in the property you own, so there’s no need to pay rent. Or you could sell it and buy something smaller, leaving you with more funds to live off during your retirement. Some people also choose to move out and rent their former property for a steady stream of income.

Start a Business

A slightly more unusual way to prepare for retirement, perhaps is to start a business on the side. You can bring in extra income to save more now, and could continue running the company full-time or part-time once you retire. If you build up a successful business, it could even be possible to sell it to top up your retirement funds. But if you don’t want to have too much leisure time when you retire, running a company part-time is an excellent way to occupy yourself.

If you want to save for your retirement, you need to start planning early. Don’t leave it until it’s too late, and you won’t be able to save enough.