The high of being self-employed never really wears off. One year down the line or 10 years down the line, you wake up in 'Freedom City' every morning. It's your call, your rules and your game! (Neither is solitaire the only game in town.) However, you owe it to yourself to keep that joy intact when retirement comes.
Why it's important for self-employed folks to have a retirement plan?
You take for granted certain benefits when you are employed full-time. These include Health Insurance, Disability, Vacations, 401K match etc. Self-employment retirement plans should be an integral part of any solo flight. You're taking your ship home – safe and steady? Right!
Benefits of having a retirement plan - both for solo-preneurs and small businesses with employees
Statistics say retirement could last for 30 years or more for an individual and a common rule of thumb is that a retired person would need up to 80 per cent of their current annual income to retire comfortably. Also, the average monthly amount paid by the Social Security Administration in the form of a benefit is $1,153? A self-employment retirement plan is therefore, an absolute must for solo-preneurs.
Don't forget retirement plans even if you have a small business with a few employees. Retirement benefits would make your compensation package attractive and retain skilled workers. As an entrepreneur, heading a small business, you could truly motivate your staff by contributing to their retirement plans – particularly if you decide to contribute a percentage of your business profits to employee retirement plans. It puts you ahead of the field as several other small businesses don't do this. You would surely improve employee retention If you spread out these retirement investments over several years,
You could also go for tax deduction for all the qualified contributions to your retirement plan. Your employees could also defer some of their taxable compensation to lower their income tax for the year. You could personally too defer part of the net earning by putting it into your retirement account. You could also go for a tax credit for setting up this retirement plan.