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Incite-FUL Profit Podcast | Incite Tax
Retirement Account Tips
In this video, John Briggs gives you no-fluff guidance on choosing a retirement account that actually works for you.
John Briggs | Tax Genius
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Some retirement tips for business owners: Luckily, the retirement tips for business owners are kind of similar to the retirement tips for individuals who don’t have businesses. The difference is that business owners are at an advantage because you control your income, how fast you make it, and the way you manage your expenses.
Ultimately, the overarching retirement tip is that you have to have money left over after your living expenses. First, you have to have money left over from your business expenses to pay yourself. Then, from what you pay yourself, you need to have money left over after your personal living expenses so that you can set that money aside. The money you set aside would go into something that builds toward your retirement.
There are so many options out there for saving for retirement. Some people like the tax-beneficial strategies you hear about on everyone’s blog—where they try to tell you it’s the best thing since sliced bread. Things like 401(k)s, IRAs, and traditional versus Roth IRAs.
Roth IRAs are post-tax contributions, which means you pay tax on the money that goes in, but when you pull the money out, you don’t. Traditional IRAs give you the tax deduction now, but when you pull the money out, you pay taxes. Of course, the government could change the rules on any of these at any point, but those are the common ones people talk about.
There are others—like a SIMPLE plan or a SEP. What you choose kind of depends on your situation and, more importantly, the goals you’re trying to accomplish. You should have those accounts if they make sense for you.
There are even higher-level strategies you could consider, depending on how much cash you have left over, like a cash balance or defined benefit plan. That’s one option. People also like investing in real estate. For example, I have clients who have retired and now have rental properties. The income they make off those properties covers their retirement. There are annuities and many other financial products out there.
Ultimately, the best retirement tip I can give you is to talk to a financial planner. When it comes to how money works and the numbers, everything comes down to your goals. Once you know what those goals are, then you can back into the plan.
The idea is to have money left over after your living expenses, and that money should go into something that you're comfortable with, that you understand, and that will result in the outcome that allows you to retire when you want to. Those are called assets—and they generate revenue of some sort.
In light of that, again, the business needs money left over after paying expenses so it can pay you. The Profit First system is a really great way to help you get that in place. And then, from what you pay yourself—from your owner’s pay and distributions—you have money left over so you can put it toward retirement.
One good strategy is to make it automatic. For example, automatically take $100 out of your personal account every month, week, or whatever frequency and dollar amount works for you, and put it somewhere that is an asset you’re going to hold. That’s a great approach—out of sight, out of mind. Automate it so you don’t have to think about it. Little, consistent payments are much better than large, sporadic ones.
To help free up cash on the business side, we also have a tool called the 13-Week Cash Flow. Click the link in the description. The idea is that if you forecast things out, you can stay on top of what your cash is going to look like over the next 13 weeks. It’s a free tool—check it out.