Q. If you actively invest in your own retirement, what’s one tip you have for other young entrepreneurs to get started?
The following answers are provided by the Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.
1. Start a Roth IRA Today
Roth IRAs let you invest in any type of index fund and/or stock you want, and you invest income that’s already been taxed (the amount you contribute, not the earnings) so that you don’t pay any tax when you withdraw it. After five years, you can also withdraw your principal, at any time, penalty free.
– Ryan Stephens, Ryan Stephens Marketing
2. Invest in Real Estate
When I was a senior in college, I walked by this house every day on the way to class. I freaking loved this house. Right next to the university with a beautiful front yard, it was the perfect college pad. One day, a tenant walked out, and I asked her if I could buy it. She put me in touch with the owner, I bought it, and now college kids are paying down the mortgage so I can have an income when I retire.
– Brett Farmiloe, Digital Marketing Agency
3. Do Your Homework
There are lots of different retirement plan options, and they all carry different tax implications for you and your employees. Work with your CPA and a financial advisor to make sure you’re not only maximizing your savings for the future, but also the tax advantages in the short term. Make sure you’re dealing with advisors who you trust to look after your business’s best interests, as well as your own!
– Brittany Hodak, ‘ZinePak
4. Work With an Advisor
Depending on how your business is structured, there are investment plans that may work for you (for example, SEP plans). Before I started my company, I made sure my financial advisor knew of my plans, and I asked her for advice on how I could fill the 401(k) and stock options gap that existed after I left a big company. Use experts, and rely on their advice!
– Susan Strayer LaMotte, exaqueo
5. Set up Automatic Withdrawals
We’ve got a lot on our plates with managing our businesses. If we try to actively manage our retirement portfolios too, it’ll never get done. Find a solution that handles your investing automatically (including pulling money on a monthly basis). You can figure out the optimum investing strategy after your company makes it big. For now, just get money put away somewhere safe.
– Thursday Bram, Hyper Modern Consulting
6. Start an SEP IRA
A SEP IRA offers much higher contribution limits than an IRA. This will be especially significant once larger profits start to roll in.
– Andrew Schrage, Money Crashers Personal Finance
7. Start Mutual Fund Investments
Mutual funds make a great foundation for individuals looking to start saving for their retirement. Mutual funds automatically give you diversity, and you can increase that diversity by incorporating several different types of funds within your retirement account. As an example, you could purchase a large growth fund, a large value fund, an international fund and an aggressive technology fund.
– Jay Wu, A Forever Recovery
8. Start With $5 per Month
Entrepreneurs often bet everything on a big win even though we know that the success may not come through. In the same way you set your company culture for the long term, set a personal culture of investing in yourself. Start putting money away today in as large of an amount as you can promise to give consistently — even $5 is a great start. Increase the amount when you can, and protect your future.
– Aaron Schwartz, Modify Watches
9. Take Three Steps
There are three simple steps. No 1. Start early — the sooner the better. No. 2. Leave it to the pros — don’t try to invest your own money. Focus your time on growing your business to get rich, and pay a financial advisors to keep you rich. No 3. Pay yourself first. Pick an amount that you can invest every month, and then set up an automatic withdrawal to fund it.
– Chris Hunter, Phusion Projects
10. Look Into a Simple IRA Program
If you have fewer than 100 employees, look into a simple IRA program. It offers a small business employer many of the same benefits as a 401(k) — matching, pre-tax contributions, etc. — with little to no administrative costs.
– Brooks Kincaid, Imprint Energy
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