Tips to Approach Retirement Savings Plan for Women Entrepreneurs

July 13, 2020 10:07 newlambertagency

No matter what stage of self-employment you may be in, thinking about how to make your investments last in retirement should be a top priority.

Saving for retirement can be challenging for anyone, but especially for business owners who invest much of their own savings and earnings into their companies.

And if you’re a women business owner, having a retirement plan in place is even more critical as in general, women live longer than their male counterparts.

To set up a robust retirement plan, women business owners must consider the following:

Develop a plan for caregiving responsibilities

Because women are often the primary family caregivers for children and ageing parents, women business owners need to have a plan in place for how to manage and share these responsibilities. Building a support network is key.

Considering the financial ramifications of work absence is also advisable since less income means fewer retirement savings — and a prolonged period away from work could negatively impact the future success of the business.

Start investing early

In the initial phase of a start-up, companies are cash poor and hence business owners won’t have the required money for investing in their own retirement. And even as a business gets its legs and ramps up, entrepreneurs often focus on the growth of their business and end up reinvesting.

But at such a lean time, women entrepreneurs must consult a financial advisor who can make recommendations for their personal retirement savings — as well as for their business. If you start early, the stronger would be your retirement plan and your savings would be that much more alluring.

Invest cash distributions in retirement vehicles, not the business

When you start to receive a considerable cash distribution from your business, it would prove advantageous to invest in stocks, bonds and non-traditional investments so as to diversify away from the single enterprise.

Of course, it would not be prudent to invest business profits in these same investment vehicles. Businesses require a certain level of liquidity to meet their financial obligations and having funds tied up in investments like long-term bonds, for example, could prove to be problematic.

Reduce tax liabilities through HSAs

If you’re a female entrepreneur with the ability to pay for upfront medical expenses through a high deductible plan, the tax advantages of health savings accounts (HSAs) are many:

  1. a) if the contribution is made as a payroll deduction, no taxes are paid on the contribution,
  2. b) investment earnings in an HSA account are not taxed, and
  3. c) qualified health expense withdrawals from an HSA account are tax-free.

By adopting these strategies to balance retirement savings with business growth and set up a conducive ‘women retirement plan’, female entrepreneurs can look to their futures more confidently — which can only be good for business.