Don't Let Working for Yourself and Saving for Retirement Be a Non Sequitur

By Bryan Beatty, CFP®
Certified Financial Planner™
Partner, Egan, Berger & Weiner LLC

When you run your own business, you are a master juggler—someone who as business guru Michael Gerber says succeeds most quickly when he or she works on their business, not in their business. Too often, however, business owners get so overwhelmed with growing their organization that they neglect personal financial-planning issues.

Why would you want to move the goal of saving for retirement up higher on your priority list?

  • Proper retirement planning can enhance the business because it helps you manage risk.
  • It also will make you more confident in the daily risks that are essential to your growth.
  • A strong financial plan has the potential to make your business more attractive to quality employees.
  • Since small business owners and their employees are more responsible today than ever before to save for their own retirement plans, saving plans provide a win-win situation for everyone.

The key is selecting the proper plan for you and your company.

Following are a few options to consider:

  • A Traditional IRA is a potentially tax deductible investment account allowing annual contributions up to $5,000 ($6,000 if over 50) that can be invested in stocks, bonds, or mutual funds as well as many other investments tax-deferred until age 59½ without early distribution penalties. The money is subject to required minimum distributions (RMD) by age 70½. Deductibility depends on family income levels and spousal qualified-plan eligibility if the spouse also works.
  • A Roth IRA is a tax-free investment similar to a traditional IRA, but the contributions are always after-tax dollars. This account grows tax-free and is not subject to required minimum distributions. Contributions are limited depending on family income levels.
  • A SEP IRA is a self-employed pension IRA. It allows for a potentially larger contribution capability. Contributions of up to $50,000 (plus an additional $5,500 if you are over 50), depending on adjusted gross income, are possible. Contributions made by the owner have contribution requirements for employees that may or may not make this plan a viable option.
  • A 401k plan is a plan that offers a little more flexibility than a SEP when it comes to contributions for employees. It allows for up to $50,000 (plus an additional $5,500 if you are over 50), but is less restrictive when providing contributions in matching formula to employees. This design allows and encourages employees to get involved saving their own money, too.

Of course, these are not the only options for retirement saving, but they are the most common.

The correct plan for you may be one of these, or something more specialized.

And remember, certain limitations, restrictions, and liabilities come with creating and maintaining a retirement and savings plan for your company, so be sure to consult your tax and investments adviser.

Coming next month: It has been highly publicized that Social Security funds will likely not be enough for most people to retire on. In fact, for the Millennial generation (those born roughly from 1982-2003), there is a real likelihood that coming changes will put more responsibility on the individual for retirement savings and planning. To help clear up the confusion, my business partner Michael Egan will discusses “The Past, Present, and Future of Social Security” in our August Retirement column. Stay tuned for that.


About Bryan D. Beatty

Bryan Beatty is a Certified Financial Planner® and partner at Egan, Berger & Weiner LLC, which is based in Northern Virginia. With more than 20 years of experience in the financial industry, he is a principal of this independent financial services firm, which is experienced in all aspects of investment and retirement planning.

An active member of the Financial Planning Association’s Career Development and College Outreach Committees, Beatty is a graduate of the University of Maryland with a BS in Finance. He was the former president of the Finance, Banking and Investment Society, and he is an avid musician who plays guitar and writes music in his spare time, and occasionally plays area venues. Originally from Baltimore, Beatty has lived in Northern Virginia since 1992.

For more information about Beatty’s services, send him an email at bbeatty@ebwllc.com.

For additional information about Egan, Berger & Weiner, LLC, visit www.ebwllc.com.

_Securities and Investment Advisory Services offered through Voya Financial Advisors, member
SIPC. Egan, Berger & Weiner, LLC is not a subsidiary of nor controlled by Voya Financial Advisors._