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The Business of Savings
The one thing small businesses can count on for retirement
Traditionally in America, building for retirement was thought to be founded on a three legged stool: 1) company pension, 2) social security, and 3) personal savings. With all three legs working together, many owners and employees could build a significant nest egg by the time they reached retirement age. With this sort of financial freedom, the options to pursue lifelong dreams could be realized.
Yet, the majority of workers have never had access to a pension, and in fact, pensions are on the decline. Social Security is designed to provide a nice supplement for American's retirement needs, but at the present, it is only funded through 2037. Without raising taxes or increasing the retirement age for Social Security benefits, it could be a pretty small supplement.
So that leaves one leg of the stool to rely on. That’s you. And you have the ability to put money away now for down the road. The next decision is to determine the best retirement saving option for yourself and others that are important to you.
For small business owners, the decision is often between an individual IRA and a 401(k) plan for their business (even the self-employed). As you can see in the chart below, a 401(k) can provide a real leg up in tax-deferred savings versus an IRA. You'll likely find it’s a pretty small price to pay for retirement.
|Annual Limit per Individual
|Age 50+ Catch-up Amount
|Roth Income Limit
||Yes, loan to self