One recent study from 2017 revealed that 34 percent of entrepreneurs have no retirement savings at all. While the reasons for this varied among participants, one thing was made clear: a large number of entrepreneurs are not taking the idea of saving for later in life seriously. Even though some self-employed individuals plan to one day retire, many CEOs and entrepreneurs are hard working, driven individuals who do not have a concrete plan to stop working. No matter whether you fall into the former or the latter group, it is crucial for all entrepreneurs to have some kind of savings for later in life.
Retirement does not mean the end of working
Merriam-Webster defines retirement as the “withdrawal from one’s position or occupation or from active working life.” Although many who are traditionally employed look forward to this period in life, and plan for it vigorously, entrepreneurs usually have a different opinion of retirement. In addition to the financial risk involved in giving up one’s business, many individuals who have built a brand or company from scratch do not want to give up their involvement with it. However, even though the goal of most retirement funds is to help individuals to withdrawal from their work, it is important to know that this is not a requirement. Instead of selling or giving up control of your organization, your goal can simply be to scale back the number of hours worked.
Creating a retirement savings allows for added leisure
If you know that you won’t be able to stop working for your own individual reasons, a retirement fund can still serve an exciting purpose. Investing in a retirement fund can help you achieve more than simply working less. If you’ve had dreams of traveling or taking more leisure time in your schedule, saving up money in an IRA account or a solo 401K plan can make those goals a reality. Even if you end up saving much less than what is currently recommended for people who plan to fully retire (about 80 percent of your income yearly), you will have plenty of funds to take extended periods of time away from your work.
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A retirement account can help you prepare for emergency expenses
As of last year (2018), experts reported that approximately 55 million Americans had no emergency savings. From home repairs, to unexpected business expenses, to sudden health challenges, emergency expenses can pop up anywhere at anytime. Even if you have a healthy savings account, it never hurts to have extra cash. This is especially true as one ages, when health expenses can add up quickly.
No matter whether you plan to fully retire or work for as long as possible, all entrepreneurs should have a retirement savings. As you age and your plans evolve, having extra funds for whatever life brings is one of the most financially savvy moves you can make.