Retirement Planning Tips for Women Entrepreneurs
When you’re running your own business, retirement planning may be the last thing on your mind. However, it’s a major financial milestone that everyone should plan for. Women already face unique considerations in retirement, such as longer lifespans. This means that a well-planned retirement strategy is even more important for female entrepreneurs.
In this article, we will share some tips to help female entrepreneurs build secure and independent financial futures.
Establish a Retirement Goal Early On
The first step in retirement planning is to define your goals. Think about the lifestyle you want during your retirement years and estimate the expenses that will come with it. Consider factors such as housing, healthcare, travel, inflation, and your target retirement age.
The earlier you start, the more time you have to let your investments grow, thus making it easier to afford the retirement of your dreams.Diversify Your Investments
As an entrepreneur, it’s quite common to rely heavily on your business as your primary financial asset. However, this approach can leave you vulnerable to market or industry fluctuations.
Diversifying your investments helps you avoid putting all your eggs in one basket. Retirement accounts such as IRAs, SEP IRAs, and solo 401(k)s are excellent options for entrepreneurs. These accounts offer significant tax advantages and long-term growth opportunities. As of 2024, the SEP contribution limit was $69,000.1
In addition to retirement accounts, consider a mix of stocks, bonds, and mutual funds to balance risks and returns. Not only does diversification protect your wealth, but it also helps your investments grow steadily over time, thus providing greater financial stability.
Build an Emergency Fund
Before focusing on long-term financial goals, it’s crucial to establish an emergency fund. This fund provides a cushion for unexpected expenses like medical emergencies, business setbacks, or economic downturns.
To handle unforeseen situations without dipping into your retirement savings, it is advisable to have three to six months’ worth of living expenses saved in an easily accessible account. This fund is essential for entrepreneurs, as their income can sometimes be unpredictable.
Protect Yourself and Your Business
Your business is likely one of your most valuable assets, which is why it’s crucial to prepare for uncertainties that could impact its value or continuity.
Protecting yourself and your business means securing adequate insurance coverage, including life insurance, disability insurance, and business insurance. These policies ensure that you and your business are protected during unexpected events.
Leverage Tax-Advantaged Accounts
Tax-advantaged accounts can play a significant role in growing your retirement savings. Options like health savings accounts (HSAs) and defined benefit plans allow you to reduce your taxable income while building a retirement fund. Furthermore, HSAs offer triple tax benefits, as contributions reduce your taxable income, funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free.2
Understanding these accounts can significantly enhance your savings potential, making these accounts an essential tool for female entrepreneurs.
Automate and Prioritize Your Savings
One of the best ways to consistently save for retirement is to automate your contributions. Set up automatic transfers to your retirement accounts so that you’re putting money away regularly, even during busy or lean periods. Treat these contributions as a non-negotiable part of your budget—pay yourself first before addressing other expenses.
Work With a Retirement Planning Professional
Retirement planning can be complex, especially when you are juggling business priorities and personal finances. A financial advisor who has experience working with small business owners can provide valuable insights that are tailored to your unique situation. They can help you to navigate tax laws, choose the best retirement plan for your needs, and balance reinvestments in your business with retirement savings.
Stay Informed and Adjust Your Plan
Retirement planning isn’t a set-it-and-forget-it process. Markets fluctuate, tax laws change and personal circumstances evolve. All these factors can impact your plan. Regularly reviewing your retirement strategy ensures that it remains aligned with your goals. Schedule an annual checkup with your financial advisor to assess your investments, update your goals, and make any necessary adjustments.
For female entrepreneurs, retirement planning requires a proactive and tailored approach that considers the unique challenges and opportunities of running a business. By setting clear goals, diversifying your investments, building an emergency fund, and seeking expert advice, you can create a robust retirement plan that supports both your business and your retirement goals.
Jeff Spitzmiller is the CEO of Ohana Wealth & Life Planning based in Cincinnati, OH. Ohana specializes in life and financial planning for professionals in the healthcare and university fields. The firm is an independent financial advisor and a fee-only fiduciary. Jeff and the firm also enjoy volunteering and giving back to the local community. You can reach Jeff at jeff@ohanaplanning.com.
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