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The Ultimate Retirement Guide for Small Business Owners

Gerald Baum
Gerald Baum
President and CEO at Baum Financial Services, Inc

Finding a strategy for the future

There are 28.8 million small businesses in the United States, according to SBA.gov, representing a whopping 99.7 percent of all organizations within the country. Unfortunately, most small business owners do not have a concrete retirement plan in place. For a lot of these individuals, the sale of their business is the crux of their sole retirement plan. However, these people need to understand that unless their small business was a side job, they do not have any employer who will assume responsibility for setting up a strategic retirement plan on their behalf. They will also not receive a pension. So, they themselves are responsible for coming up with suitable retirement plans – plans that are tailor-made to fit their exact needs and requirements.

But this is easier said than done. Without concrete knowledge about retirement, small business owners will find it difficult to figure out which moves will benefit them. If you are in the same boat, this guide can give you an idea of the next step.

Face your fears

Ask any small business owners what they fear, and they usually provide a few common answers. Prominent among them is the fear of running out of financial resources later in life, contracting an ailment that wipes out their savings, or realizing that their monthly income at the time of retirement is not enough to meet their basic needs. Hence, it is important for small business owners to face their fears head-on before retirement and plan accordingly so they arrive at a feasible solution. The first step toward facing your fears is to figure out how much money you will need to lead a comfortable life during retirement.

Calculate the numbers

Bear in mind that your business won't be there to handle some of the expenses. So, a number that's in the ballpark of your possible living expenses post-retirement might just be the wake-up call you need to start saving more carefully. You will find lots of resources like calculators and retirement worksheets online to help you get a handle on future costs.

Devise a good exit strategy

Coming up with a proper business exit strategy might seem a bit premature when discussing retirement planning, but the truth is your business can be your greatest asset. You can use it to fund your retirement and stop working as well. However, this involves liquidating your investment. The decision to sell off your small business is not an easy one, but you still need to consider it so that your business finds its own bearings. There is also the matter of finding the right buyer for your business.

The ongoing state of the market will determine if you're able to sell your business at peak value, but you still need to make provisions for all eventualities. This involves creating a retirement plan that offers enough flexibility to sell off your stake at a time when the market is strong or keep on working if a recession occurs. The key takeaway here is that under no circumstances should you agree to a distress sale.


Leave enough aside for your future retired self

The future is uncertain, which means the more financial resources you save, the more comfortable you will be in the later part of your life. However, this involves putting money aside during your working years. Think of it as investing in your future retired self. A successful retirement depends on several factors, but key among them is your total savings. So, try to accommodate a suitable amount into your monthly budget.

Decide what retirement strategy suits you

As a small business owner, you have a couple of retirement plan options available to you. It is important that you know about them so that you can make an informed decision. You have three separate kinds of tax-deferred retirements plans:

  • Solo 401(k)

To make more sense of which plan is the best for you, you should take into account how much time you have left, how much you intend to save, whether you need to access your savings before retirement, and to what degree your employees will participate in the process.


A SIMPLE (Savings Incentive Match Plan for Employees) IRA is one of the most common retirement strategies available to owners of small businesses. This plan enables employers to contribute to their savings as well as that of their employees. As per the features of this plan, employees have the opportunity to make salary reduction contributions, which means you must make either nonelective or matching contributions. These contributions add to an existing Individual Retirement Annuity (IRA) or Account for every employee.


The SEP (Simplified Employee Pension) is an individual retirement account that welcomes contributions from both small business owners and their employees. SEPs allow the business owners to make tax-deductible contributions for eligible employees, and these employees are not required to pay any taxes on the amounts contributed by employers until they take the distributions from the plan upon retirement. SEPs are highly accessible to small business owners because they are not dependent on how many employees they have or the way their business is structured. The business owners are treated as employees themselves and are free to make employee contributions to their personal accounts.

Solo 401(k)

A 401(k) involves a qualified profit-sharing strategy that enables employees to contribute part of their wages to individual accounts. Not only does this enable employers to contribute to employee accounts, but elective income deferrals are excluded from the taxable income of the employee. During retirement, the taxable income may also include distributions, such as earnings.

The above points should give small business owners an idea of what goes into the making of strategic retirement plans. However, there are still lots of nuances that you need to know about. For this purpose, you should seek help from an expert – someone who can make sense of savings vehicles and help you meet your goals.

Other sources

1. https://expertbeacon.com/expert-advice-retirement-planning-small-business-owners#.WXWcfoSGO1s
2. https://www.usatoday.com/story/money/business/smallbusiness/2017/02/14/inexpensive-retirement-plans-small-business-owners/97261752/
3. https://www.forbes.com/sites/nextavenue/2016/12/08/5-retirement-planning-tips-for-small-business-owners/#1257aa2b28ce

Image Credit: Jerry Sliwowski/Shutterstock
Gerald Baum
Gerald Baum
business.com Member
See Gerald Baum's Profile
Presenting his advanced structural fixed annuity positioning to thousands of individuals through dinner seminar venues, Gerald Baum brings to his clients a substantial academic background coupled with an extraordinary business acumen that can only be acquired by “true grit” business ownership and management. His business experience brings added value in the practical application of the concepts necessary to successfully navigate through many of the complexities of planning for retirement. Gerald received his B.A. Degree from the University of South Florida in Tampa and his Master’s Degree from Yale University in New Haven, Connecticut. Mr. Baum focuses entirely on retirement planning strategies using fixed insurance products. His primary goals are the elimination of market volatility risk for a portion of his clients retirement savings, to provide reliable and consistent income for his clients throughout their retirement.