Small Business Owners, Are You Preparing for Retirement?

March 5, 2012 | By Steven DiGregorio

No pension, no retirement savings — and no solid plan for how they will fund the latter part of their life. That’s the dire situation for many small-business owners.

About a third of small-business owners do not have a personal or business-sponsored retirement plan such as a 401(k), a SEP IRA or deferred annuity, according to a new survey from non-profit the American College. Nearly the same numbers have not even estimated how much money they need for retirement.

Many workers feel unprepared for their golden years. But a lack of retirement planning by small-business owners is stunning because they “have no one else to rely on,” says Mary Quist-Newins, director of the State Farm Center for Women and Financial Services at the American College.

Unlike government or company employees, who are eligible for 401(k)s or similar plans, small-business owners are often solely responsible for their retirement planning. That can be a difficult task for a business owner who is already taxed time-wise.  Saving for retirement can fall to the bottom of the “to do” list. Too many small business owners are just living in the moment, trying to keep the business going. Other reasons business owners aren’t better prepared for retirement:

Just surviving takes priority over saving. Businesses that are in the start-up and early growth phase often reinvest money into the firm and don’t put it into retirement funds. Many small business owners actually stopped retirement funding during the downturn. Certainly when you’re worried about your business surviving, you’re not worried about funding your retirement.

They think the business will provide for their needs. Some owners solely plan on continued revenue from the business or proceeds from selling the firm to sustain them later in life. Then there are those who prefer to rely on their business’ returns rather than the equity or real estate markets. But if the firm goes south, they are left with nothing.

Setting up a company savings account appears daunting. Some have yet to set up an employer-sponsored savings plan primarily because the paperwork seems daunting and complex.

They don’t consider retirement. Many entrepreneurs love what they are doing and don’t see the point of retiring, so they don’t plan for it. It’s hard for many of them to think what life would be like without running the business.

Solution to Overcome the Odds – Keep It Simple

  • Simplified Employee Pension (SEP)
    • Easy to set up and operate
    • Low administrative costs
    • Flexible annual contributions
  • Simple IRA Plan or Simple 401(k) Plan
    • Available for fewer than 100 employees
    • Minimal paperwork and administrative costs
    • Elective employee contributions that employer must match up to 3%
    • Non-Elective employer contributions up to 2% to all eligible employees

Increase the liklihood of your financial independence – Pay yourself through the business & save on taxes!  Don’t rely on the success of your business as the single method for funding your retirement.  The Primary Keys to the greatest success…get started sooner than later and be consistent!

The information herein contained does not constitute tax advice. Any decisions or actions based on tax related information contained herein should not be made without first consulting a CPA or Accountant.

For more information contact Compass Asset Management Group, LLC at 845.563.0537 or

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm. Securities offered through an affiliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.

Tags: 401(k), defer, elective contributions, IRA, retirement plan, Retirement Planning, SEP, Simple 401(k), Simple IRA, simplified employee pension, small business

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STEVEN M DIGREGORIO is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.
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