Learn the 5 Rules for Self-Employed Retirement now to ensure your financial future. The growth of the gig economy has meant that a lot more people than ever before are now essentially their own bosses. Some are starting up businesses, others have escaped the ‘rat race’ and headed into freelancing.
There are many advantages to this lifestyle. But it also means no one else is looking out for you when it comes to retirement savings. Unlike employees with access to various retirement plans offered by their employers, it’s all up to you if you want to set money aside for your golden years.
As getting your retirement savings plan started as early as possible is always the best course of action, whether you are self-employed or not the best time to start thinking about how you are going to fund your retirement is now, no matter how old you are.
To help you get started here are five ‘rules’ to keep in mind as you begin to plan.
The Benefits of Diversity Apply To You Too
Unless you manage them very carefully the things that make you such a success as a self-employed person – your innovative thinking, your willingness to take risks and your above average optimism – can prove a disaster when planning for retirement.
The keys to long-term retirement investment success are solid advice, common sense and a diversified portfolio, and they apply as much to you as they do to someone following a more traditional career path.
Don’t Sink Every Penny Into Your Business
Reinvesting profits into your business is something that is a good idea, especially as the tax benefits can be rather appealing. Perhaps you have convinced yourself that as you get older that investment will mean that you can sell your business for a hefty profit and ride off into the sunset with that, maybe even earlier than expected.
Sadly, the statistics don’t back that idea up. Numerous studies have shown that a mere 20-25% of privately owned small businesses are ever sold. There are a few reasons for this. One is that the success of a small business is often down to its owner’s own skills and network, and without them, it would not survive.
The second is that in today’s rapidly changing world and business environment what is working today may become obsolete in the future and that maybe sooner than you think.
Unless you’re many steps ahead of technology and changing consumer attitudes, and you employ people who are as good as you are, you have to accept at least the possibility that your small business may never sell. Having accepted that, start planning to fund a sound – and completely separate from your business retirement plan.
Take Care of Your Current Self First
There’s little point in planning for retirement if you don’t make it that far. You need to ensure that, as a self-employed person who only has themselves to rely on to do such things that you have a good medical aid scheme in place, gap cover to make up the difference between what your medical scheme pays out and the actual cost of care and sufficient life cover.
These things are all more affordable than you might think and should be firmly in place before you move on to the next step.
Have a Real Plan
You need a formal plan when it comes to preparing for retirement. Take an afternoon off and start researching your options by meeting with a financial planner. As a self-employed person, you are probably used to going things alone and doing your own research. But unless you are in the finance business there’s a lot you should know about successful retirement planning that simple Google searches can’t reliably teach you.
Don’t Neglect Your Business
Despite what we said earlier, don’t make the mistake of not giving your business the attention it deserves. No, you may never become the next Elon Musk or Mark Zuckerberg, but accepting that your business is not a retirement plan should not stop you from doing everything in your power to increase the probability of a sale and its overall success in general.
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