5 Advantages Of A Retirement Plan For Business Owners

Entrepreneurs wear multiple hats. In fact, there can be so many that it is easy to get caught up in the everyday tasks and activities, forgetting to plan for your personal long-term future. This makes having a plan in place for all aspects of your life, including your retirement, essential. However, there are as many potential benefits to having a plan as there are pitfalls to pressing on in your business life without one. 

This article shares tips from a fiduciary CERTIFIED FINANCIAL PLANNER™ in the D.C. area at Brown | Miller, including: 

  • Why a comfortable retirement does not have to be an unachievable dream
  • How an advisor-prepared retirement plan can boost your confidence
  • What legally-minimized tax liability can mean for your nest egg
  • Why professional retirement planning can lead to better resource allocation 


1. Planning for the future helps to motivate you 

dreams reality action motivation quote concept doodle hand drawn vector lineRetirement planning can seem like a far-off, unachievable dream. It involves considering how much money and time you will need to save for retirement when the reality is that it could be decades before your plan is in place. Nevertheless, a retirement you can look forward to becomes more real—the moment that you have formulated a pathway to success. 

Having something tangible and concrete that charts out your road forward can help make sure that you keep moving toward your goals over time. It might even make the occasional longer-than-usual workday feel a little more worthwhile. 


2. Retirement planning encourages more deliberate resource allocation 

A well-strategized financial plan for your business can help you to discern what is most important to you. It can also give you a clearer picture of how much money and time it will take to achieve your money goals. This, in turn, can facilitate decision-making based on your priorities rather than on what is most convenient or easily accessible at any given moment. 

Entrepreneurs have many responsibilities and challenges to manage. As a result, you may occasionally feel like there is not enough time or money to pursue everything that is important to you. The upside is that a retirement plan allows you to be more deliberate with both of these resources. 

Additionally, a retirement plan can give you the freedom and confidence necessary to successfully run both sides of your life; your professional and your personal matters. This can prevent you from having to sacrifice one side over another. 


3. Retirement planning provides peace of mind for business owners 

As a CEO, your role is to also ensure that you and your employees have a retirement plan available. And if you’ve spent years managing dedicated workers who have invested their time into helping build your company, they deserve a retirement plan to fall back on. Whether you have a few employees, or a few dozen, there are plenty of solutions to explore with experienced guidance. 

We understand the entrepreneurial mindset and your need for custom-tailored solutions.


4. Retirement planning can reduce your tax liability 

Taxes can have a significant impact on your business, so it is important to consider them when, for example, you forecast future company profits. Imagine that you are projecting $100,000 in profit from your business next year. Meanwhile, you end up with only $80,000 after taxes are taken out. You must re-evaluate how much money is necessary to run the company. 

On the bright side, the same tax code can be an enemy or an ally. It all depends upon how you approach (and plan, long-term for) your taxes. In either case, they affect how much money is left over for reinvestment into your future growth, so seek advantages where you can. 

Tax-deferred growth, for instance, is powerful. It can even offset the tax liability of a Roth IRA when compared to that of an ordinary retirement 401(k). 

Overall, the more you save in your IRAs annually, the better your potential income after leaving the workforce. However, Roth IRAs have cap contributions based on your current income level (e.g., it was $6,000 for taxpayers younger than age 50 with a modified AGI of $129,000 or below in 2022, per the IRS). 

Save more than you could on your own. 

Golden piggy bank sitting on income tax formA 401(k) plan is not funded by the government; it is sponsored by an employer. In other words, it is voluntary, so you do not have to join one if you do not want to. However, if you choose to, your contributions are deducted from each paycheck before taxes are taken out. These pre-tax dollars mean more of each payment goes towards your retirement savings. 

Again, how much you can have awaiting your exit from the workforce depends on the contribution limits native to your type of retirement account. In 2022, the maximum for a 401(k) was $20,500. However, taxpayers older than age 50 could add an additional catch-up contribution of $6,500, also. Since these are per-individual limits, your marital status is not considered. The ceiling for Roth IRAs is lower. 


The Takeaway 

You are responsible for more than simply ensuring that your employees are able to perform their jobs properly, ethically, and efficiently. In fact, you may have several employees who report directly to you—and even more who do not—so there is no way around it: you are going to have your hands full on a regular basis. 

Most small business owners want nothing so much as to be able to provide their loved ones with financial stability when they retire. Regardless, not everyone can afford to, since they have not made enough money throughout their careers to date (or, in some cases, because they have experienced unfortunate circumstances). 

Your odds of doing so significantly increase the sooner that you start preparing. Retirement plans are an intelligent way to save for your golden years, but their benefits hardly stop there. To efficiently evaluate which type could fit your unique needs best, you need an expert who understands how each one works. 


Brown | Miller Wealth Management has the experience and expertise to help you create optimal retirement planning strategies, financial planning strategies, and many more of the potential building blocks for your company’s long-term success.


Contact us today and discover why some clients may call us the best financial advisor Washington D.C. has to offer. 


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Author: Christopher W. Brown, CFP®, CIMA®

Christopher W. Brown is the Founder and Managing Principal at Brown | Miller Wealth Management.