What Retirement Looks Like for Dreamers and Entrepreneurs

If we’ve learned anything from the past two years, it’s that nothing is guaranteed. Planning for retirement is something many do throughout their career, with company-matched 401k programs and setting up IRAs. Working for a company can provide an employee with stock plans, matching funds, and other incentives that look toward the future.

But what does retirement look like for the self-employed, the entrepreneurs, and other dreamers who choose to work for themselves, or those living paycheck-to-paycheck by choice or by circumstance? Some actions can be taken to ensure a strong future for those workers.

Expert Advice

With the assistance of Wealthtender, a website whose goal is to help people reach their money goals at any stage of life, financial experts share some of their advice for what those working in non-traditional roles can do to secure their future.

• Start small and early. Saving a small amount can go a long way toward the future. It can be as simple as putting away $25 a week ($100 per month) into a retirement or savings account. Also, start saving as early as possible to help create a solid financial plan.
• Consider one of the following as a business owner: Roth IRA, Traditional IRA, Simplified Employee Pension (SEP), or a Solo 401(k). If these terms are unfamiliar or confusing, then seeking a financial planner or viewing the offerings at Wealthtender may be of assistance.
• Take advantage of tax-advantaged savings. This includes individual Health Savings Accounts (HSAs), Simplified Employee Pension (SEP), SIMPLE, and defined benefit plans. Outside of these options, there are taxable brokerage accounts and permanent life insurance.
• Consult a financial planner. No matter your situation, a financial planner can best advise what kind of plan might work best, even if there is no existing IRA or 401k.

“I think the thing to understand is that entrepreneurs tend to be bigger risk-takers as compared to employees who receive a steady paycheck from their employer,” says Ryan Firth, CPA/CFS with Mercer Street.

“As the entrepreneur’s business matures, assuming it reaches and sustains profitability, a growing share of the entrepreneur/owner’s wealth may be tied up in the business because profits are usually reinvested back in the business (the business generates a higher rate of return on capital than the owner can generate anywhere else). It can be a highisk, high reward proposition. So in essence, the business becomes the owner’s retirement plan.”

Carefree Attitude About Retirement/No Plan

There are, of course, those who don’t think or care about retirement and might even live under the “work until you die approach.” They might not have a plan for various reasons or live day-by-day with no savings or plan. It may be more challenging for them to create a retirement plan for a variety of reasons, or perhaps they don’t think retirement planning is important.

Jenna VanLeeuwen, CFP®, Financial Planner for Online Entrepreneurs and Principal at Aligning Wealth, shares, “If you are doing something you enjoy doing, why would you even care about traditional retirement? I think it’s great when people can create a wonderful life doing work they enjoy and living a life they enjoy in the moment.”

However, she cautions that one still needs to consider what they will need when they can no longer work and have that choice rather than be sick and unable to care for those needs.

Becky Neubauer is a millennial money expert, Founder of TwentyFree, and host of Find Your Freedom Podcast is one of the success stories. She uses her experience of paying off $70,000 in student loan debt in less than two years and finishing her retirement savings by age 26 to write financial content to help others reach this freedom on her website.

She says, “Even if you are someone who doesn’t want to plan for retirement, having some sort of financial safety net for the future is encouraged to help you plan for the unexpected.”

Handling the Naysayers

Dreamers and entrepreneurs are likely to hear kickback or worry from family members and friends who do not understand this less traditional route for retirement or may think these people need to “get a real job” with an employer offering these benefits. It can be hard for both the entrepreneur and the family member to understand each other.

Neubauer offers a three-step approach for dealing with some of these concerned naysayers.

1. Explain that you have a solid plan in place and confidence in achieving goals.
2. Remind them that you are taking control of the future and have made this active choice to pursue your dreams, even if that is not the traditional way.
3. Assure them that you are not alone in this—that other entrepreneurs have found success by following unique paths, and you intend to do the same.

Melissa Mittelstaedt, Financial Counselor, AFC® Candidate with MelissaMitt Financials, says, “We all know what it’s like to have the ‘we don’t know what we don’t know’ experience. That is what your family is going through. They don’t understand the fire, the passion, the spark that makes an entrepreneur—and that’s okay, they don’t have to. One of the best ways to show them you’ll be okay and that you know what you’re doing is to establish a retirement account,” she says. “Planning for your future is not only the right thing to do for you, but it’s the right way to show your family that you can have your cake and eat it too.”

Retirement planning can be a tricky path to follow for many employees and families. However, many who take on the traditional approach have a Human Resources department to help them navigate this process. For self-employed, entrepreneurs, and “dreamers,” the process isn’t as clear or features as much guidance.

Obtaining the advice of a financial planner is one of the best ways to design a clear retirement plan. Check out Wealthtender’s guide to finding and hiring a financial professional as a way to start.

Originally published at Wealth of Geeks

By Kelley Dukat