Most self-employed people are not saving enough

BY RIEVA LESONSKY

Small business owners spend most of their time thinking of, dreaming about and plotting their business’s future. But too often, they sell themselves short by neglecting to plan for their own futures. That’s the result of a recent retirement planning survey from TD Ameritrade.

TD Ameritrade’s Self-Employment and Retirement Survey and Infographic reports that small business owners are making some big retirement planning mistakes. First, almost 70 percent of self-employed people don’t save for retirement on a regular basis, if at all. Some 40 percent don’t save regularly, while more than one-fourth (28 percent) admit they don’t save at all. By comparison, just 12 percent of employees say they don’t save regularly and only 10 percent don’t save at all.

There’s a disconnect between small business owners’ expectations and reality. More than half (59 percent) of survey respondents say they expect their retirement to be funded by savings—but a substantial number aren’t saving enough or at all.

Small business owners face more retirement planning challenges than the traditionally employed, including unpredictable income (cited by 61 percent), which can make it hard to save for retirement. And they frequently have to spend more to afford health insurance than do employees, which can chip away at money that might otherwise be earmarked for retirement.

But that’s no excuse. Retirement plans today offer more options than ever before. There are even 401(k) plans for one-person businesses and plans that allow you to make irregular contributions when your income requires it. If at all possible, however, I’d urge you to follow the lead of traditional employees and have money for retirement deducted from your paycheck on a regular basis. Just 8 percent of self-employed people do this, compared to 53 percent of employees, but forcing yourself to save regularly (without being tempted to use the money By 2020, Millennials will comprise 50% of the workforce.”  The Future of the Workplace for anything else) can make a huge difference in your ultimate retirement savings. Because of the power of compound interest, putting aside small amounts regularly and for a longer time can ultimately mean more money than if you try to put away huge chunks later, when you’re older. Another TD Ameritrade survey found that Baby Boomers who contributed to their retirement accounts consistently were better prepared for retirement than those that didn’t save regularly.

Even though small business owners are aware of many retirement plan options, amazingly, the most common vehicle they choose to save for retirement is a traditional savings account. I don’t know about your bank, but the interest my savings account pays isn’t enough to fund the retirement of a flea, much less a small business owner!

There’s a saying I often cite: Something is better than nothing. Take any step, no matter how small, toward planning for your retirement, and you’ll be on your way to a more secure future in 2015 and beyond.

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