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As a small business owner, you have a lot on your plate. From managing cash flow to making sure your employees are happy, retirement planning might not be at the top of your to-do list. However, it’s important to start thinking about your retirement now to ensure you’re prepared for the future. In this article, we’ll discuss managing risk in retirement, specifically long-term care insurance, and other considerations you should keep in mind as a small business owner.

Long-Term Care Insurance

Long-term care insurance is a type of insurance that helps you pay for long-term care in a nursing home, assisted living facility, or at home due to a chronic illness or disability. It’s important to note that Medicare and standard health insurance policies do not cover long-term care expenses, which can be costly.

As you age, the likelihood that you will need long-term care increases. Long-term care insurance can help alleviate the financial burden associated with long-term care expenses. When selecting a long-term care insurance policy, keep in mind the following:

  • Benefit amount: The maximum amount the policy will pay per day or per month.
  • Benefit period: The length of time the policy will pay benefits.
  • Elimination period: The amount of time that must pass before the policy starts paying benefits.
  • Inflation protection: Whether the policy offers inflation protection to keep up with the rising cost of long-term care.
  • Coverage options: Whether the policy offers coverage for home care, assisted living, nursing home care, or a combination.
  • Premiums: The cost of the policy.

A senior couple smiling and looking at a brochure about long-term care insurance policies

Keep in mind that long-term care insurance is not for everyone. It’s important to discuss your options with a financial advisor to determine if long-term care insurance is right for you.

Health Care

Health care is an important consideration for all retirees, but it’s especially important for small business owners who may not have access to health insurance through an employer. Here are some things to keep in mind when planning for health care expenses in retirement:

  • Medicare eligibility: You are eligible for Medicare at age 65. Make sure you understand your options and any costs associated with Medicare coverage.
  • Health Savings Accounts: If you have a high-deductible health plan, consider contributing to a health savings account (HSA) to save for future health care expenses.
  • Supplemental insurance: Consider purchasing supplemental insurance to cover things that Medicare does not, such as prescription drugs or vision and dental care.
  • COBRA: If you plan to retire before age 65 and lose your job-provided health insurance, you may be eligible for COBRA coverage. Keep in mind that COBRA can be expensive, so it’s important to budget accordingly.

A person holding a Medicare card

Social Security

Social Security is a retirement benefit paid by the government to eligible individuals who have paid into the system through payroll taxes. As a small business owner, it’s important to understand your Social Security benefits and how they factor into your retirement planning. Here are some things to keep in mind:

  • Eligibility: To be eligible for Social Security retirement benefits, you must have earned at least 40 credits by paying Social Security taxes.
  • Full retirement age: Your full Social Security retirement age is based on the year you were born. You can begin receiving reduced benefits as early as age 62, but waiting until your full retirement age will result in a higher benefit amount.
  • Spousal benefits: If you’re married, you may be eligible for spousal benefits based on your spouse’s earnings record. This can be especially beneficial if one spouse earned significantly more than the other.
  • Taxes: Social Security benefits may be subject to federal income taxes if your income exceeds a certain threshold.

A retired couple sitting on a bench and holding hands

Retirement Savings

As a small business owner, you may not have access to traditional retirement savings options such as a 401(k) plan. However, there are still plenty of retirement savings options available to you. Keep in mind the following:

  • Traditional and Roth IRAs: Traditional and Roth IRAs are individual retirement accounts that allow you to save for retirement with tax benefits.
  • Simplified Employee Pension Plans (SEPs): SEPs are designed specifically for small business owners and allow you to contribute up to 25% of your compensation or $56,000 (whichever is less) to your retirement plan each year.
  • Solo 401(k) plans: As a small business owner with no employees, you may be eligible for a Solo 401(k) plan. This allows you to make contributions as both the employer and employee.

A person adding money to an IRA account

Conclusion

Retirement planning can be overwhelming, but it’s important to start thinking about it now to ensure that you’re prepared for the future. Long-term care insurance is an important consideration for all retirees, but especially for small business owners who may not have access to other insurance options. Health care, Social Security, and retirement savings should also be taken into account when planning for retirement. Remember to work with a financial advisor to create a plan that works for you and your unique situation.

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