Do Retirement Savings Matter If You Don’t Want To Retire?

Originally written for ForbesWomen

Do you want to retire? It’s a question that stumps a lot of entrepreneurs, even though it seems like it should have an easy “yes” or “no” answer. But recent studies have shown that the under-50 crowd really doesn’t think about retirement the way prior generations did. In fact, roughly 72% of us assume we’ll keep working and earning money in some capacity after we “retire.” Many business owners really love what they do and can’t imagine fully giving up their careers.

So, if retirement (the kind where you travel the world and then settle down and take art classes at the local rec center) isn’t really your focus as a business owner, why should you prioritize retirement savings? Can’t you just rely on the income you expect to keep earning? Or on the proceeds from eventually selling your business?

Let’s address these questions by asking more questions:

• Why should you prioritize retirement savings? 

What does retirement mean to you specifically? Knowing what you want in the future, even if it’s just a target to move towards that will change over time, will help set the trajectory for your life and give you the “why” that’s important when talking about savings. Do you want the ability to keep working but scale back your time spent on the job? Shift away from traditional business roles to consulting, charitable or humanitarian work, or civil service?

How much are you paying in taxes? Saving into retirement accounts can significantly lower your taxable income if you do it correctly. Knowing how to make smart tax decisions from a savings perspective can help current-you pay less in taxes and future-you have more in your investment accounts.

Do you have employees? Having a retirement plan for your employees not only boosts employee retention, but it can also give you another way to lower your taxable income. 

• Can’t you just rely on the income you expect to keep earning?

How are you currently spending money? Knowing how much you typically spend and where your money is going will help you determine what level of expenses you might have to cover in the future. It will also help you understand if your business is running efficiently, and show you ways to prioritize saving more easily.

How long do you expect to live? Life expectancies are getting longer, and women statistically live longer than men. If your family history and medical history also point to a strong possibility of living a long life, will you be able to support yourself through all of it?

Have you considered the possibility that you may not be able to keep working for as long as you expect? A large majority of workers under 50 expect to work far past age 62 (again, about 72% of us!). But the average age for retirement is age 62 and is frequently due to medical or economic issues that force people out of the workforce, with 71% of workers being fully retired before age 65. What will your financial situation look like if you have to stop working earlier than expected?

• Can’t you rely on the proceeds from eventually selling your business?

Have you researched the percentage of businesses that actually sell in your industry? According to the (admittedly sparse) data, only about 25% of small businesses ever sell. If you have a family business that you expect to pass down or other succession plans already in place, or if you’re in an industry where businesses are highly valued and sought-after, you’re in a better position but it’s still not a guarantee that you’ll be able to sell for your desired price. 

Have you been focusing on having a profitable business? Being profitable will make your business much more valuable to a buyer. But, if you’ve been spending everything that’s been coming in, whether that’s due to payroll and operating expenses or from actively trying to spend down your profit to show less taxable income, you’re going to have a hard time convincing a buyer that your business is worth the investment. Showing consistent, long-term profit will show buyers that your business is healthy and worth buying, and will allow you to prioritize retirement savings and build your personal wealth at the same time. An actual win-win situation.

Overall, whether you plan to retire in the “traditional” sense or not, saving for retirement is about so much more than funding an IRA or 401(k) or investment account. It’s about creating a vision to work towards, making smart tax decisions, building a safety net, fostering a workplace where employees are invested (figuratively and literally), prioritizing the health of your business, and having options when you choose to sell your business or close up shop and do something new.

Let’s change the name of the game from “retirement savings” to “tax-smart savings that create options for you now and later,” because that’s what you’re really doing when you sit down and make a financial plan. It doesn’t matter if your plan is to retire at 55 or to keep working forever, making decisions that prioritize the financial health of your business is one of the most important things you can do.