Entrepreneurs: The Most Terrifying Statistics
Most of us have the same goals. We want financial security, especially in our retirement years. We want an ability to maintain a comfortable long-lasting lifestyle without running out of savings.
Yet, there are many of us that haven’t even begun to save, or even invest, which is one of the worst things you can do. Some say they don’t invest because of a lack of knowledge, or a feeling of intimidation and fear of the economy. Others times they’ll use the excuse, ’I’m young. I’ll worry about investing later‘ or ’I’d rather use my money to buy things,’ or even ’I don’t have enough money to invest.’
Even some of the smartest entrepreneurs aren’t saving for retirement at all. In fact, according to a recent Entrepreneur article, “a full 25 percent of small-business owners report they aren’t saving a dime. On top of that, a whopping 47 percent of small-business owners report that they are saving less than 10 percent of their income.”
About a third of respondents plan to cash in by selling their company at a later date. “Not only is the amount entrepreneurs are saving low, it’s getting lower. This year, 47 percent of entrepreneurs have a nest egg of more than $100,000, compared to 59 percent in 2013.”
Many of us – entrepreneurs or not – put our money in our back pocket, where it makes no money. Or, our money is earning nearly nothing in a savings account.
Instead, they should make their money work for them.
By investing, whether in stocks, bonds, mutual funds, options, commodities, or real estate, you are helping your money generate even more money with interest or an increase in asset value.
What many also fail to understand is that if you begin investing early enough, your money will actually work for you due to the value of compounding returns. Even if you invest conservatively over time, long-term compounding will allow you to reap rewards.
Whatever you decide to do, make your money work for you.
Unless a family member is leaving you a great deal of money in their will, social security and other benefits will not be a great source of retirement income either. My advice to get you started in the right direction: Participate in company retirement plans, IRAs, ROTH IRAs, and other 401k retirement plans - especially if companies match funds.
Here are some key tips to investing well.
Start Saving Today
It doesn’t matter if it’s $20 a month or $5,000 a month. Allow for compounding interest to accrue and generate earnings. Any money earned can then be reinvested. The more you can afford to sock away now at when you’re younger the better. Open an IRA, meet your employer’s match program, or even contribute often to your 401(k). Even in retirement, life can be expensive. According to the U.S. government, you’ll need at least 90% of your pre-retirement income just to maintain your standard of living when you stop working.
Have an Actual Plan
You can’t really succeed if you don’t know where you’re going, or where you’re headed. Sit with a financial planner. Write down your goals and have him help you figure out how to get there. Remember, financial success is a choice. If you choose to do nothing, you will receive nothing. Understand savings and cash flows you currently have and what they may look like in the future.
Learn the Rules
The rules of retirement can be just as confusing as tax codes a times. Know if you should stick to a Roth IRA or a traditional IRA over the year. Know which has tax-deductible contributions or tax-free withdrawals. As you reach retirement age, check on Social Security to see how you may be able to claim more money by waiting until you reach full retirement age. Own your home. Own rental real estate. Have money in tax-deferred retirement plans. Diversify in stocks. These are things to understand as you plan for retirement. And remember that diversification is key. You wouldn’t put all your eggs in one basket.
Have Financial Cushions
Heading into retirement without proper diversification, especially in cash is a bad idea. Imagine retiring tomorrow, and the stock market crashes back to 6,500. Have a Plan B just in case. For example, have a couple years worth of cash on hand at all times so you can still pay your bills and live. Don’t head into retirement without a stress test on what ifs.
In short, be prepared to retire. Or, plan to not retire. It’s your choice.