Saving for Retirement

Retirement Planning for Business Owners

Why to think beyond your business

Wine store owner taking inventory, "Retirement Planning for Business Owners"

Small business owners lead a different lifestyle than their traditionally-employed peers, from the hours they keep to the challenges they face. It’s the same with retirement planning, notes Craig Coopersmith, Senior Vice President and Private Financial Advisor at SunTrust Investment Services, Inc. (STIS). But business owners deserve a gratifying retirement as much as anyone. Craig shares tips for making that happen.

What are some specific challenges faced by small business owners as they look ahead to retirement?

I would say the number-one challenge is just not knowing what’s out there. Most business owners know their business. They know how to make a profit with what they’re doing, but they don’t necessarily think about how to save outside of the business. Also, business owners are pretty limited as far as what they can do for retirement planning. A lot of them don’t want to have an additional cost to pay for that benefit for their employees, so that’s another challenge that they have.

Do small business owners tend to think differently about retirement than most workers?

That’s been my experience. They seem to think that their efforts and their knowledge can bring them more wealth, not really thinking about what age 70 looks like. So rather than taking their profits and putting them into an investment plan for their retirement, they think that they can add more value and get a better return on investment by putting it back into the business.

What’s the best way for business owners to start focusing more on their retirement plans?

Really, just to become knowledgeable about the resources that are available to both help them and provide a benefit to their employees, if they have any. Thinking about your own retirement is important, but when you have employees, you’re also responsible for their future, so providing them with a retirement benefit or even a resource for them to plan is just as important.

What retirement savings opportunities are available for small business owners?

There are several different vehicles, and all of them vary based on the amount of money owners are allowed to contribute into the plan and the cost to actually run the plan. Small business owners tend to want to keep their expenses low. As a result, they will either offer a simple, inexpensive plan, or they’ll just do without an employer-sponsored plan altogether and just use a traditional IRA (individual retirement account) for themselves, if they don’t want to offer that benefit to their employees or don’t have any employees. If they do have employees, 401(k) plans and others have matching available, where the employee puts a certain amount in and their company can match it. This is a great retention resource and helps their employees save for retirement.

What recommendations do you give specifically to small business owners?

Diversifying your assets is probably the most important, as is staying disciplined. If they’re doing that well, I’ll try to help them look at different lines of credit and some lending tools to be able to leverage their business activities, where their retirement is on autopilot. And the best way I’ll try to overcome any resistance business owners specifically might have is from a tax perspective. All business owners love to pay less taxes, so if we can get $20,000, $30,000 into a retirement plan, it’s that much less in tax that they’ll be paying.

How can a financial advisor help small business owners prepare for retirement?

I don’t have the skills my business clients do—like selling cars or building bridges—but I do know how to provide advice and knowledge for building a financial plan. What I explain to my clients is, “When I drive over a bridge you worked on, I am confident that you spent all the hours of your work day focusing on that and not the spreadsheet tracking your investments.” It’s definitely more efficient for owners to have a 10-minute conversation about what resources are out there rather than spending hours on their own research.

For more on retirement and investing planning:

Call the STIS Client Advisory Center at 844.206.8900 or learn more online.

Note: Center hours are 8-6 ET, Monday through Friday

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