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5 Retirement Planning Tips for Business Owners

Retirement planning may not be your priority right now. However, business owners can plan a bright future for themselves & their employees. Here's how to start.

As a business owner, chances are your focus is on the business of business – today. Retirement planning may not be your top priority right now. However, business owners can plan a bright future for themselves and their employees – even if retirement is decades away.

  1. A retirement plan is good for you, your employees and the success of your business. The U.S. Department of Labor estimates that retirees will need between 70% and 90% of their current income to maintain their present standard of living.

    Starting a retirement plan for yourself and your employees may attract more qualified employees who stay on the job longer because of the retirement benefits your company offers. The IRS also points out that company-sponsored retirement plans can provide business tax savings – a big advantage.

  2. Contribute regularly to retirement accounts. Many times, business owners take home whatever is left over after all operational expenses have been met.
    Try to give yourself a paycheck you can depend on – a paycheck that automatically deposits even small contributions to a retirement plan each pay day.

  3. Define your retirement objectives. How do you predict how much you'll need in retirement? That's your primary retirement objective. There are valuable retirement calculators that help determine how much you'll need to enjoy a long, secure retirement. Use these calculators as a starting point in establishing your retirement objectives based on your plans for the future.

  4. Choose the right retirement plan. The most popular company retirement plans are simple to set up and administer – a time and cost saver.

    A 401(k) is a basic retirement plan suitable for businesses of any size, and includes both employers and employees. As of 2020, the IRS raised contribution limits to $19,500 with catch-up contributions for employees age 50 or older at $6,500.

    A traditional IRA offers a tax deduction every year that employer or employee contributions are made. Assets grow tax free, and don't have to be touched until you and your employees reach age 70½, at which point mandatory deductions must be made and taxes paid on those withdrawals. Businesses can help employees set up traditional IRAs, and help fund them as well.

    A Roth IRA does not provide tax deductions in contribution years, but all contributions grow tax free, and no taxes are due on withdrawals. Maximum annual contributions for both traditional and ROTH IRAs are $6,000 combined. If you're age 50 or older, you can put in an additional $1,000, for a combined total of $7,000.

    A SEP is designed for both employees and self-employed individuals. This Simplified Employee Pension plan allows your employer to set up and make contributions to a SEP-IRA for each individual, with more flexibility, larger annual employer contributions and lower start-up costs. Contributions must be an equivalent percentage for every employee, and the 2020 limit is 25% of an employee's compensation, up to a maximum of $57,000 per employee. The new compensation limit is based on a savings calculation of $285,000, up from $280,000 in 2019. Contributions are tax deductible for the business, coming right off the top of your corporate return.

    A Simple 401(k) is funded by employer contributions and optional employee deferred compensation contributions. The company can offer a percentage of matching funds as an incentive for employees to save more, and to stay on the job. There was a $13,500 maximum annual contribution limit for Simple retirement accounts in 2020, plus a $3,000 catch-up limit.

    A Simple 401(k) doesn't require the extensive reporting that a standard 401(k) requires, making it ideal for small and mid-sized businesses that want to keep the team happy, offer an IRS-approved retirement plan, save on taxes and keep employees in place.

  5. Develop a retirement plan with the help of a certified financial planner experienced in business owner retirement options. You know your business, you know your company revenues, but you may need some expert advice on financial planning for retirement to understand what will work best for you as a business owner.

Whether you're in the planning stage, the early growth phase of a new business, or you own a mid-sized company with a bright future, add retirement planning to your to-do list today.

Remember, as a business owner, the only one who'll pay you a pension is... you.


Make sure your retirement plan is in order. Talk to a Cadence Bank Wealth Services advisor today.


Guidance provided in this article is educational in nature, is not individualized, is not intended to provide legal or tax advice, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions. You should consult with an attorney, tax or other qualified professional for specific advice regarding your unique circumstances.

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