Top 6 Reasons Entrepreneurs Don't Save for Retirement but Should

February 14, 2019 Written by Oralie Chapman

Business owners, understandably, tend to focus on the growth of their business rather than retirement savings. Many believe that they will be able to sell the business in order to retire and others don’t feel that there is enough money left over to set aside for retirement. According to a 2017 survey of 1,960 small business owners by Manta, about 34 percent of small businesses owners don't have a retirement savings plan. The truth is that there is no guarantee about how much the business will be worth next year let alone in years down the road or how long the business will last so a retirement savings plan is a necessity.

A survey by Paychex Small Business found that two out of five small business owners are nervous that they will not have enough money to retire or that they will need to sell their business in order to retire. The ability to save money in a retirement savings account like a 401(k) would ease worry and better prepare small business owners for the future beyond their working years. A retirement savings account will be there whether or not the business lasts; ensuring a more stable financial future as long as the account is not drained.


Top 6 Reasons Entrepreneurs don’t save for retirement but should


1. Putting all money back into the business. Business owners are focused on growing their business and want to make sure they have cash on hand if a business need comes up. While these are well-meaning considerations, a portion of the money should be set aside for an investment in retirement savings. Diversifying assets ensures financial stability beyond the business.


2. Planning to sell the business as a retirement plan. Business owners often overestimate the value of their business and how easy it will be to sell their business when they are ready to retire. If this is the plan, it is very important that business owners get regular assessments of the value of their business.


3. Too busy to setup a retirement savings plan. Being a small business owner can require long hours and when people are feeling stretched thin it can be hard to take on one more thing. Setting up a 401(k) for yourself and your employees has many benefits. If you need help managing a 401(k) policy, consider partnering with a PEO.


4. Believing retirement plans are too complicated. Setting up a 401(k) is simpler than it used to be and there are more businesses that help small businesses establish and manage 401(k) policies than there were years ago. If business owners choose not to go with a 401(k) they can still save up to 25 percent of their earnings or $55,000, whichever is less, in a SEP-IRA (as of 2018). To do this, owners only need to fill out a half page of information.


5. Failing to structure the business as an LLC. It is common for a business to start as a sole proprietorship but as it grows, that status can mean risking personal assets needed for retirement. The best way to protect personal assets is to convert the business to an LLC.


6. Raiding retirement savings to start a business. Many people are tempted to borrow money from their retirement funds to start a business but with 8 in 10 small businesses failing in the first 18 months this is a risk that can end very badly.


Partnering with Makai HR


Need help setting up and managing a 401(k) plan? That’s okay; we’ve got you covered through HR outsourcing! When you partner with Makai HR you can get on with the business you are trying to grow while we take care of your employee needs from 401(k) plans to payroll, taxes, health insurance/benefits, and worker’s compensation. You also gain peace of mind that you are in compliance with all of Hawaii’s employer laws (if you’ve ever looked you know that the list is very long). When choosing a PEO to partner with, there are many things to consider including cost, services and technology solutions.


With the cost of doing business in Hawaii at record highs, we know how important it is to keep labor costs in line with revenue. Our plans are priced competitively and include value-added services like time-in/time-out systems. Our three tiers of PEO service plans are tailored to the size of your business and specific needs. We offer a 100% paperless solution which means that your employees can manage their needs through a computer, tablet or phone. We can truly improve your employees work benefits while freeing you up to run your business.


What are you waiting for? Companies who partner with a PEO benefit from 7-9% faster growth, 10-14% lower employee turnover; and they are 50% less likely to go out of business. Contact us today to get started!