4 Mistakes Entrepreneurs Make With Retirement Planning

Here are four common mistakes entrepreneurs make when it comes to retirement planning. Start now and you can avoid and/or correct these pitfalls.

Mistake #1: You plan on selling your business in the year you want to retire. Then you will take that money and live off it.

But what happens if you sell your business for less than the amount you think you can get for it? You may have to work longer than you'd like, or you may have to reduce your lifestyle in retirement.

Consider the following factors that may increase the value of your business: the quality of your client base, the quality of the systems that you have in your business, the degree to which your business relies on you - the key person, and what your unique competitive advantage is. Even though you could be years away from selling, the sooner you improve these attributes, the earlier your business could gain enterprise value.

Mistake #2: You've put all of your eggs are in one basket - your business.

It's important to diversify your net worth. Consider saving 10-15% of your income into some type of retirement plan. You won't have all your chips on the table and you'll be able to take advantage of great profitable years in your business by taking part of that income and socking it away for a rainy day.

Mistake #3: Taxes.

Use an after tax figure when estimating what you will net when you sell your business. Consult with your accountant to determine if the sale will be taxed at a long term capital gains rate versus your ordinary income tax rate. Also, set money aside each quarter to pay your estimated taxes or the taxes that will be due each year. That way, you won't be stuck with a huge tax bill at the end of the year.

Mistake #4: Not setting aside enough time to plan for what you want.

If you are consumed by your business, think about what your life in retirement will look like.

• What do you want to retire to?

• What do you want to retire from?

• What does your perfect week look like in retirement?

• What are you doing? And who are you doing it with?

Reflecting on these answers will make it easier for you to put a dollar figure on what your monthly living expenses could be.

Planning for retirement is a process. Chip away at it. You'll begin to have clarity. That way, the decisions you make along your life journey will bring you closer to what you want later in life - and maybe even today.

This article is for informational purposes only and should not be construed as individualized investment advice.