After another turbulent year in the markets, you may be feeling antsy about your retirement investments. But past ups and downs have shown that chasing the markets is like chasing your tail: You can go around and around and never get anywhere.
If you’ve been struggling to see the bigger picture when it comes to your retirement, consider refocusing with these five retirement planning tips for business owners.
1. Know where you stand financially
High inflation has negatively affected some households more than others. If you own your home outright or have a low-interest-rate mortgage, you may have a hedge against inflation, which can help your overall financial picture. However, if you’re a high earner who rents, finances an expensive vehicle or has credit card debt or a high-interest-rate mortgage, you’re likely to have been hit harder by rising prices and higher interest rates.
Especially in times of economic stress, a basic assessment of earnings, spending and debt can provide a starting point for deciding how to approach retirement savings. Consider taking time to review your finances in the context of your retirement. You may be able to stabilize your day-to-day spending and begin consistently saving for retirement.
2. Prepare for spending and income shocks
It can be hard to prepare for something you hope never happens. But it’s important to know you have multiple safety nets. If you don’t have an emergency reserve of three to six months of personal expenses, consider mapping out a plan to get there. This reserve is one way to avoid dipping into your retirement savings when you hit a rough patch in life or business.
3. Consider disability insurance
You likely have health, life and even long-term care insurance. But what about disability insurance? It’s often overlooked. Only 9% of workers say they have it, according to a survey from the Employee Benefit Research Institute, yet health issues are a top reason people retire earlier than they’d planned.
4. Stay calm, stay invested
Over the long term, equities can be a good hedge against inflation — but only if you avoid jumping into and out of the market. None of us can predict the future, but trying to dodge the worst days of the markets can also mean you’re likely to miss the best days. When markets are volatile, rebalancing sometimes makes sense. Converting all your investments into cash usually doesn’t.
J.P. Morgan’s Guide to Retirement can be a helpful resource. It compares the returns of a $10,000 investment in the S&P 500 over the past 20 years, which includes the Great Recession of 2008. The research shows that investors benefit when they avoid the temptation to pull out of the market.
5. Minimize tax bills through tax diversification
Increasing your retirement savings during times of inflation may be difficult, but tax diversification can help you make the most of your opportunities. Consider maintaining taxable, tax-deferred and tax-free (Roth) investments that together give you flexibility when it’s time to retire.
If you haven’t yet started a 401(k) plan for your business, now may be a great time to consider one. A new 401(k) offers many tax benefits for you and your business. Plus, it can help you attract and retain your best employees. With the passage of SECURE 2.0 in December 2022, there are now even more incentives to implement a new plan.
Beyond retirement and 401(k)s, 529 accounts and health savings accounts can round out a tax-efficient plan, and qualified health savings accounts can help fund health care expenses in retirement.
Now more than ever
In times of unsettled markets and mixed economic signals, it’s important to know where you stand and to have a solid plan to help secure your future. Learn more about how a 401(k) plan can help you and your employees earn the retirements you deserve.
Learn more about J.P. Morgan retirement plan solutions. Choose Get Started, answer the four questions and a retirement plan specialist will reach out to you and discuss your options. We will help you find a plan that meets the needs of your business and your workforce. Our transparent pricing is low-cost to the business.
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