I’ve heard it said that 50 is the new 40, and 40 is the new 30.
As a business owner, if you’ve been busy keeping all the balls in the air, running and growing your business but haven’t gotten around to planning for the day you eventually stop working, this strategy is for you.
If you are a small business owner (with no employees outside of your spouse), make over $200,000+ a year, are 45+ years old, and haven’t started saving for retirement, I have a plan for you to retire with $3,000,000. And if you’re married, you can double this amount to $6,000,000.
How? Using the tax code and a specific Small Business Retirement plan to your advantage. This retirement plan has advantages over the more common SEP IRA or other types of retirement plans.
Here’s the assumptions and plan:
45-year-old business owner, income of over $200k+, and $0 in a retirement account.
- From age 45-49: contribute $69,000 into the Small Business Owner Retirement Plan each year.
- From age 50-60: contribute $76,500 into the plan (with a catch-up provision allowing an additional $7,500).
- From age 61-65: no contributions—if your home isn’t paid off, use these years to pay off your home instead.
- Retire at age 65.
15 years of contributions over a 20-year period, assuming a modest return, and you’ll have nearly $3 million dollars ($6 million if you include your spouse).
Over this same period, you will have written off over $1 million dollars in business expenses and personal deductions that saved approximately $300,000 in federal taxes alone.
You might be surprised as to what’s possible—with proper planning it might just feel like we can turn back time.
-Paul R. Rossi, CFA