The 5 Most Common Retirement Planning Mistakes that Women Business Owners Make

Woman frustrated over laptop.

As a financial advisor specializing in working with women business owners, I am absolutely passionate about ensuring women prepare for their financial future. Unfortunately, I have seen that many women business owners make retirement planning mistakes that can jeopardize their ability to eventually retire on their terms.

Here are the five most common retirement planning mistakes that I see women business owners make:

Mistake #1: Count on the business itself to fund their retirement

Quite often business owners assume that one day they’ll simply sell the business and use the proceeds to fund their retirement.

If this is what you’re doing, you’re probably ignoring the old adage that you need to “pay yourself first.” Instead of also saving for your retirement, you’re plowing all of your profits back into your business.

This approach is full of risks! For example, new developments in the marketplace can cause the value of your business to plummet. The new owners can pay for part of their purchase with stock in the company, and then wreck the business. The economy can crash just as you reach retirement age. And so forth.

 As a financial advisor and fiduciary who has extensive education in the specific retirement planning needs of business owners, I’m here for you. Let’s talk!

Mistake #2: Wait too long to get started

I often speak with women who are 50 years old and have not yet begun to save for retirement. “I’m not worried,” they tell me. “Retirement is still a long way away!”

The reality is, by the time you’re 50, you’re late to “the retirement savings” party. The earlier you get started, the more you’ll be able to put the magic of compound interest to work for you … and the less money you’ll need to put away to create the retirement nest egg you need.

The best time to get started saving for retirement is when you start working. The second best time is today.

Mistake #3: Do not properly diversify their investment portfolio

Most people believe if your investment portfolio is strategically allocated between stocks, bonds and mutual funds, it’s diversified. However, there are certain risks that are unpredictable and impossible to avoid, such as earthquakes, wars and global pandemics.

These types of risks are what is called “systemic” risk. To mitigate and manage systemic risk you need to include a variety of asset classes in addition to equities and fixed income, such as real estate and cash. Using insurance-based products to transfer this risk can also be a viable solution, as this can be structured to protect your principal and add guarantees to your financial future.

Mistake #4: Do not take advantage of all the retirement savings options available to business owners

Business owners have several retirement savings options. For example, even if you are a solo entrepreneur or only have a spouse working with you, you can have a 401(k).

You don’t have to have a corporation or an LLC to take advantage of this. Even if you are a sole proprietor you can set up what is referred to as a “Solo-401(k),” “Uni-401(k)” or “individual 401(k).” The good news is that if you do not have employees, you are exempt from the time-consuming 401(k) “discrimination testing” rules that apply to companies that do have employees.

The most important step is to start! If you just need to get going, you can start small with an IRA or Roth IRA, and then get your 401(k) in place after that. If you have employees, of course, there are a number of other considerations to be aware of, too.

Mistake #5: Attempt to figure it all out themselves

Retirement planning always involves complex financial considerations. Add your business to the mix and it gets even more complicated because now there are additional tax, legal and other aspects to consider.

If you are normally a do-it-yourself type, you need to recognize that your financial future is too important to try to figure it all out yourself. To avoid making significant mistakes – mistakes from which you may not be able to recover – obtaining professional retirement planning guidance is vital.

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