Did you know one-third of small business owners don’t have a retirement plan?
As you’re building up your small business, thinking about how you’ll wind down into retirement is probably the last thing on your mind.
It’s never too early to think about retirement, especially since one-third of small business owners don’t have a retirement plan, according to a report by Manta.
Whether you’re thinking about your own retirement or helping your employees get into the habit of saving, it’s important to build your “savings” mindset early and start planning for the future.
This week is National Retirement Security Week (Oct. 20 to 26), and today is a better time than ever to get started on your retirement strategies. Here are some strategies to help your employees save for retirement while encouraging yourself to do the same.
Pay employees generously and regularly evaluate their salaries
If you want to help your employees save, the most important thing you can do is to pay them a fair wage. As a small business owner (SBO), you might be reticent to invest too much money into your employee’s salaries.
However, by paying above industry standards (or at the very least, at the industry standard!) you’ll allow them some financial freedom to put money away each month while living comfortably within their means.
Regularly evaluate their salaries in comparison to inflation each year to make sure what you’re paying them is still enough. This will make them more invested not only in their own savings but working for your company as well.
Offer a company retirement savings plan
It may seem complex and expensive to set up a retirement savings plan, but this has many advantages for small business owners and is good for business on many levels. By jumpstarting everyone’s saving, you can get your company on the right track and start instilling saving habits.
This will help keep your business competitive in the employment marketplace, and even allow you some tax breaks as a business owner.
There are a variety of retirement savings plans across the United States, with popular ones including Simple IRA, SEP IRA, and 401(k)s. If you’re unsure about where to begin and which plan would work best for your business, the IRS has provided a wealth of guidance on their website for SBOs, which you can view here.
In any of these options, you can choose to match your employee’s contributions as an incentive, or simply provide the accounts for them to use.
Encourage employees to max out their own contributions
If you’ve been able to establish a company retirement plan, then you’ll want to encourage your employees to learn about what is available to them, and teach them how they can max out their contributions.
One of the biggest obstacles people face when it comes to saving for retirement is the lack of knowledge and information. As an employer, you can organize for financial institutions to come to your office and give lunch and learn style sessions on different retirement savings accounts and what they each offer.
Beyond partnering with financial institutions, you could encourage saving habits with your teams by holding savings “challenges” like the 52-day savings challenge.
Here, you encourage people to put $1 in savings each week and increase that by a dollar each week. By the end of the 52 weeks, you’ll have saved $1,378. This is free, fun, and a great start to getting people in the mindset of savings.
Pay yourself first
If you’re not in a place where you’re ready to offer a retirement plan to your employees, you can still set yourself up for success by saving for your own retirement. For U.S. SBOs, IRAs and Solo 401(k)s are individual plans that you can contribute to regularly.
It’s important to pay yourself first and prepare yourself for the unexpected. Some SBO prefers to invest all their money back into their businesses, but this strategy will leave them out of luck should some unexpected factors impact their business.
Many financial planners suggest saving 10%-15% of your income as a guideline when it comes to retirement. This number is not set in stone and can change depending on how late or how early you start saving.
Give yourself personal savings goals each month, set up an automatic transfer from your checking account into your savings account, and if you’re struggling to meet your goals, find an accountability partner to keep you on track. Wherever you are on your savings journey, remember that a penny saved is a penny earned.