You started your company and started to make a profit. And although you may have abandoned the principles of a traditional 9 to 5 so you can follow the path that is best for you, there are a few things to consider.
Before you rush to buy that new luxury car or new home, I want to remind you that building a profitable business does not mean forgetting about investing for the future. In fact, you may want to start thinking about your retirement a little earlier than most because you may exceed the financial goals you set aside for yourself.
One of the first principles that corporate America teaches us is how to plan for the future. The package of benefits with the standard 401K offering of several mutual fund options to choose, of which, you have access to your monthly statement of your retirement savings no longer exists, now that it is all in your hands. Well, don't lose that discipline as a founder.
Once my company turned a substantial profit, I felt the urge to splurge on a few celebratory items, until I remembered that I needed to take a long term view of my success to forecast for the days ahead. My decision to sit with a certified financial planner to discuss my long term objectives was the best way to hold myself accountable and a decision that I advise every high growth founder to consider - early.
So before you indulge on your first retail splurge to celebrate your success, here are some things you should consider about planning your own retirement.
1. Hire a certified financial planner.
This is not a time to take the opinion of an unqualified person or YouTube video. Hire the best and protect your investment. Remember, this is an investment in your future, so you need to interview a few CFP's to find the one who understands your end goals.
2. Consider the retirement options that work best for you.
According to Neil Jesani, CFP, with BeamaLife Corporation, "the top three retirement accounts that high growth entrepreneurs should consider are a Defined Benefit Plan, Non-Qualified Deferred Compensation Plan or the IRS Section 7702 Plan." He also added, "One should give at least 20 years to get the highest ROI."
One factor that I had to consider was my age and my desired age of "retirement" when I chose my retirement account. If your plan is to retire earlier than the standard age of 65, contribute the maximum allocated to your account now.
3. Think about your succession plan early.
I recently discussed how my father's recent passing impacted my thoughts about succession planning. Creating a retirement plan should be accompanied by a succession plan for the future earning potential of your company.
My father had a retirement plan, but failed to create a succession plan for his company, which created a legal nightmare shortly after, and subsequently his retirement earnings. It was a valuable lesson about the importance of choosing your successors early, prior to your retirement.
Speak with your financial advisor and attorney about adding it to your trust before you decide to retire.