Retirement

Luckily, starting a retirement plan for yourself and your employees doesn’t have to be difficult. These tips will help you choose a plan and start saving now, no matter where you are in the life cycle of your business. The benefits are big, including, earning interest or compound returns on your retirement savings, attracting and keeping top-quality employees and enjoying greater peace of mind.

1. Figure out how much to save
Most experts recommend saving 10 to 12 times your current annual income in total before you retire. Keep in mind that how much you need to save will also depend on how much you’ve saved already, the type of lifestyle you want after you retire, how long you expect to live, your overall health and the age when you want to retire. Whatever your target, experts recommend contributing 12 percent to 15 percent of your gross earnings (what you make before taxes) to your retirement account each year.

You can use this online calculator to help calculate your target number. Once you have a figure, determine how much you’ll need to contribute to your account each month to meet your goal. Setting up automated contributions can keep the process simple.

2. Choose the option that’s best for you and your business
Choosing the best type of retirement plan for you and your employees can feel like a daunting task. Start by learning about the options available and consider speaking to a financial or tax advisor about which option may be best for you.

Depending on the country you live in, there will be various retirement account options for your employees.

3. Track your progress
Because factors can change over time, including your number of employees, business income, health and other factors, it’s important to revisit your retirement savings plan periodically to figure out how successfully you are moving toward your goal. If you find that you’re falling behind, here are a few ways to increase your savings:

• Review your budget.
  Are there areas where you can cut back in order to earmark more for retirement? This could include anything from switching phone plans to eating out less.
• Add to your income.
  If you find that you’re not able to save more, it may be time to consider ways to make more. This could mean adding a new product or service to your offerings or taking on a side gig, such as driving for a rideshare program.
• Consider reducing expenses.
  Are big mortgage or car payments making it too difficult to save? In some cases, downsizing to a smaller house, more affordable business space or less expensive car can be the key to freeing up some extra funds for retirement.
• Evaluate the cost of debt.
  What credit or loan debt is impacting your investment goals? While it may feel good and seem best to eliminate debt as quickly as possible, it can be critical to compare ongoing cost from debt interest to what is known as opportunity cost from debt payments that could otherwise be invested. Comparing future debt payments to historical investment returns can help you decide how to best utilise your available funds.
• Start an emergency fund.
  While experts suggest having three to six months of living expenses set aside, that can be a lofty goal to start with. However, ensuring that you have a small cushion of liquid funds available for unexpected expenses such as an insurance excess can help avoid using a credit or loans that increase the overall costs due to interest rates.

4. Create a succession plan
As the owner of your business, it’s important to have a plan for exiting the business if the need arises, whether it’s because you’ve reached retirement age or are facing a life circumstance you didn’t anticipate. Creating this plan involves careful thought and strategy. See Selling and Succession Planning for details on how to get started.

Although you may be overwhelmed by the day-to-day tasks of running your own business, taking the time to plan for your own retirement is an important step toward protecting your financial future — and that of your family.