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Retirement Planning for Entrepreneurs: A Simple Guide

Luke Turner

Entrepreneurs build businesses. But many forget to build their own retirement plan. Without a 401(k) from an employer, you need a strategy. If you wait too long, you might end up working forever.

This guide breaks down easy steps to retire rich.


If you aren't looking to retire but still want to maximize your finances as an entrepreneur check out our complete guide to wealth management for entrepreneurs here.


Retirement planning for entreprenuers


Why Entrepreneurs Must Plan for Retirement


Unlike employees, entrepreneurs get no automatic retirement benefits. You must:


  • Save for your own future.

  • Use tax-smart investment plans.

  • Balance business growth with personal wealth.

  • Protect yourself from financial risks.


Without a plan, you may run out of money in old age. But if you start now, you can retire on your terms.


5 Steps to a Strong Retirement Plan


1. Open a Retirement Account


Entrepreneurs have powerful savings options:


  • Solo 401(k) – Best for business owners with no employees. Max contribution: $70,000/year.

  • SEP IRA – Good for business owners with employees. You can contribute 25% of net earnings.

  • SIMPLE IRA – A low-cost plan for businesses with fewer than 100 workers.

  • Defined Benefit Plan – Best for high-income earners. Allows the largest tax-deferred savings.


Smart Savings Tips:


✅ Over 50? Make catch-up contributions to grow your money faster.

✅Contributions lower taxes while boosting wealth.

✅ Choose a plan based on income, business size, and future goals.


Example: Lisa, a consultant, started saving $35,000 a year in a Solo 401(k) at age 35. She stayed consistent, never missing a year. By 60, with 7% average growth, her savings had grown to $2.7M. When she decided to retire, her investments provided $100,000 per year in passive income, allowing her to enjoy life without financial stress.



2. Invest Beyond Your Business


Relying only on your business is risky. You need other investments.


Where to Put Your Money:


  • Stocks & Index Funds – Grow wealth with dividends and capital gains.

  • Real Estate – Rental income covers expenses in retirement.

  • Tax-Free Accounts – Roth IRAs and Roth 401(k)s let you withdraw tax-free later.


Example: Mark, a restaurant owner, invested $500,000 in stocks and real estate over time. He purchased two rental properties worth $250,000 each and invested in low-cost index funds. By age 60, his rentals had appreciated to $1 million total, and his stock portfolio had grown to $500,000. With passive rental income covering 60% of his expenses, Mark was able to retire without relying on business income.



3. Plan Your Business Exit


One day, you will leave your business. A solid exit plan ensures you get paid well.


Your Exit Options:


  • Sell the business – Cash out to fund retirement.

  • Transfer ownership – Pass it to family or employees.

  • Merge with another company – Get paid while staying involved.


Steps to a Smooth Sale:


✅ Get a business valuation so you know what it's worth.

✅ Structure a tax-friendly sale to keep more money.

✅ Plan early so you don’t have to sell in a rush.


Example: Jake, a tech entrepreneur, built his company over 20 years. At 50, he worked with a financial planner to increase profitability before selling. At 55, he sold the company for $3M, keeping $2.5M after taxes. He reinvested the funds into stocks and annuities, creating a steady retirement income of $150,000 per year.



4. Use Smart Tax Strategies


Taxes can eat into your savings if you don’t plan well. Here’s how to keep more of your money.


3 Tax Moves for Entrepreneurs:


  • Max out retirement contributions – Reduces taxable income today.

  • Roth Conversions – Pay taxes now for tax-free withdrawals later.

  • Deferring Income – Delay taking profits in high-tax years.


Example: Sarah, a marketing agency owner, learned about Roth conversions in her 40s. She moved $500,000 from her traditional 401(k) into a Roth IRA in lower-income years. By 65, her Roth IRA had grown to $1.2M, and she never had to pay taxes on withdrawals. Because of this strategy, she saved $250,000 in future taxes, letting her keep more of her wealth.



5. Protect Your Wealth from Risk


Your retirement savings need protection from lawsuits, business failures, and accidents.


Shield Your Retirement Savings With:


LLC or S-Corp – Keeps business debts from touching personal wealth.

Asset Protection Trusts – Protects savings from lawsuits.

Insurance Policies – Cover business risks so savings stay untouched.


Example: John, a consultant, was sued for business-related issues. Luckily, he had set up his business as an LLC and had an umbrella insurance policy. His $2M in retirement savings stayed safe, and he continued to live comfortably in retirement. Without these protections, he might have lost half of his savings to legal fees.


 

Case Study


A Tale of Two Entrepreneurs: A $7 Million Retirement Gap


Meet James and Eric: Two Business Owners, Two Different Futures


James and Eric both started businesses at 30 years old. James built a software consulting firm. Eric ran a construction company. Each made $250,000 per year.


James planned for retirement. Eric didn’t.


At 60, James had $7.6 million in retirement savings. Eric had $550,000 and had to keep working.

Financial Metric

James (Planned)

Eric (Did Not Plan)

Difference

Solo 401(k) Savings

$3.1M

$0

+$3.1M

Investment Portfolio

$700K

$0

+$700K

Real Estate Value

$1M

$0

+$1M

Business Sale Proceeds

$2.8M

$500K

+$2.3M

Total Wealth at 60

$7.6M

$550K

+$7M

Let’s break down why.


James: The Entrepreneur Who Planned for Retirement


James knew his business wouldn’t last forever. He took four smart steps to secure his future.


Step 1: He Used Tax-Advantaged Retirement Accounts


  • He started a Solo 401(k) at 30.

  • He contributed $25,000 per year, increasing to $35,000 after 50.

  • His 401(k) grew to $3.1 million, assuming a 7% return.


Step 2: He Built Income Beyond His Business


  • He invested $10,000 per year in stocks and index funds.

  • He bought two rental properties worth $250,000 each.

  • His investments reached $700,000. His real estate grew to $1 million.


Step 3: He Had a Business Exit Strategy


  • At 50, he hired a consultant to increase profits.

  • At 58, he sold 40% of his business for $1.5 million.

  • At 60, he sold the rest for $2 million, walking away with $2.8 million after taxes.


Step 4: He Used Smart Tax Strategies


  • He converted $500,000 into a Roth IRA for tax-free withdrawals.

  • He saved $300,000 in taxes by using Roth conversions and tax-loss harvesting.


James’ Final Wealth at 60


  • Solo 401(k): $3.1M

  • Investment portfolio: $700K

  • Real estate: $1M

  • Business sale proceeds: $2.8M

  • Total Retirement Wealth: $7.6M


James retired early, debt-free, and stress-free. His rental income and dividends covered his living expenses.


Eric: The Entrepreneur Who Didn’t Plan


Eric assumed his business was his retirement plan. He reinvested all profits back into the company but saved nothing.


Step 1: He Ignored Retirement Accounts


  • He never opened a Solo 401(k) or IRA.

  • He missed out on 30 years of compound growth.

  • If he had saved $25,000 per year, he’d have $3.1 million like James.


Step 2: He Didn’t Invest Beyond His Business


  • He never bought stocks or real estate.

  • His only asset was his company.

  • When business slowed, he had no backup income.


Step 3: He Struggled to Sell His Business


  • At 55, he tried to sell but couldn’t get his asking price.

  • By 60, the value dropped to $700,000.

  • After taxes, he walked away with only $500,000.


Step 4: He Had to Keep Working


  • Without passive income, he had to keep withdrawing savings.

  • He delayed retirement until 67.

  • He downsized his lifestyle to stretch his money.


Eric’s Final Wealth at 60


  • Business sale proceeds: $500K

  • Personal savings: $50K

  • Real estate assets: None

  • Investment portfolio: None

  • Total Retirement Wealth: $550K


Eric had to take a part-time job to cover expenses.


The $7 Million Retirement Gap

Financial Metric

James (Planned)

Eric (Did Not Plan)

Difference

Solo 401(k) Savings

$3.1M

$0

+$3.1M

Investment Portfolio

$700K

$0

+$700K

Real Estate Value

$1M

$0

+$1M

Business Sale Proceeds

$2.8M

$500K

+$2.3M

Total Wealth at 60

$7.6M

$550K

+$7M

James ended up $7 million richer because he planned ahead. Eric relied only on his business, which left him financially stranded.

Lessons from James vs. Eric


Start Early: Even small contributions grow over time.

Diversify Investments: Never depend only on your business.

Have an Exit Plan: A structured business sale brings security.

Use Tax Strategies: Maximize retirement accounts and Roth conversions.

Create Passive Income: Stocks and real estate provide stability. James' retirement planning allowed him to retire comfortably at 60, while Eric's lack of preparation forced him to delay retirement and struggle financially. By implementing the tax-efficient, diversified strategies outlined in this blog, entrepreneurs can ensure long-term financial security and avoid a retirement crisis.



 

If you are a business owner who is looking to find a financial team that specializes in you, schedule a call, and talk with a Moment founder.


Not sure what questions to ask, check out this video on 10 questions you should ask when interviewing a financial advisor.


Get in Touch With An Advisor





Frequently Asked Questions

Here are some answers to questions I received frequently about this topic.

Frequently Asked Questions (FAQ) – Retirement Planning for Entrepreneurs


What is the best retirement plan for self-employed entrepreneurs?


The best plan depends on your business and income. A Solo 401(k) is great for those with no employees. A SEP IRA works well for business owners with staff. A Defined Benefit Plan allows the highest tax-advantaged savings for high earners.


How can I save for retirement while reinvesting in my business?


Set aside a fixed percentage of income in a retirement account each year. Keep investing in stocks, real estate, or tax-free accounts to build wealth outside your business. Never put 100% of your money into the company.


What tax benefits do entrepreneurs get for retirement savings?


Retirement contributions lower taxable income. Pre-tax plans like Solo 401(k)s and SEP IRAs grow tax-deferred. Roth accounts allow for tax-free withdrawals in retirement.


How do I retire if my wealth is tied to my business?


You need an exit plan. Sell to an outside buyer, employees, or family. Use sale proceeds to fund retirement accounts. Avoid waiting until the last minute to sell.


What’s the smartest way to invest for retirement?


Don’t rely only on your business. Invest in stocks, real estate, and tax-free accounts. Build passive income streams like rental properties or dividend stocks for stability.


Can I use a Roth IRA for retirement savings?


Yes! If you make too much, use a Backdoor Roth IRA. This moves money from a traditional IRA to a Roth IRA for tax-free withdrawals later. A Roth Solo 401(k) is another option.


What happens to my retirement savings if my business fails?


If your business shuts down, your retirement savings stay safe. Solo 401(k)s, IRAs, and Roth accounts are protected. Never mix business and retirement funds.


How much should entrepreneurs save for retirement?


Aim to save 15-25% of your income. Build multiple income sources like stocks, rental properties, and dividends to reduce risk.


What insurance helps protect retirement savings?


Get umbrella insurance, key person insurance, and disability insurance. These policies protect you if your business suffers or you can’t work.


How do I make sure my savings last in retirement?


Use a 3-4% withdrawal rule to avoid running out of money. Keep a mix of investments for stability. Plan tax-efficient withdrawals so you keep more of what you saved.


 

*Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.


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