Retirement planning: 4 golden rules for small business owners

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Running a small business is an all-consuming task! It takes all your passion, drive, and financial wherewithal to start and grow your business. It is quite natural then that retirement planning might be your last priority. But that is a rookie mistake. As a business owner, you are susceptible to financial uncertainties and while you may have the flexibility to retire later than ordinary working professionals, retirement planning needs serious consideration.

Small business owners face unique challenges often leaving limited money to invest for retirement. Some of these challenges are:

Cash crunch: Small businesses struggle with inadequate working capital, hindering their ability to recover outstanding debts promptly. This forces them to seek financial aid, such as working capital loans, exposing them to additional risks.

Absence of a retirement provision: Salaried individuals have a retirement provision typically built into their income streams EPF, wherein the employer also contributes/matches funds. Business owners do not have these benefits which makes saving for retirement even crucial.

Balancing business investments and personal savings: Entrepreneurs must balance reinvesting profits into their businesses with saving for retirement. Neglecting personal savings can lead to financial strain later on.

Once entrepreneurs navigate the ambiguity of cash flow, retirement becomes an inevitable reality. Here are a few pointers to kickstart your retirement planning journey.

Master the 20:20 rule: Given your flexibility to retire late, you can start retirement planning in your 50s (by then your business is established). Assuming you retire at 70, you have at least 20 years to expand your investments. 2 decades, to invest for