Skip to main content

Financial Planning and Retirement

Lesson 5 from: Put Your Money to Work: Take Control of Your Business’ Finances

Dominique Broadway

buy this class


Sale Ends Soon!

starting under


Unlock this classplus 2200+ more >

Lesson Info

5. Financial Planning and Retirement

Next Lesson: HoneyBook Panel

Lesson Info

Financial Planning and Retirement

a lot of times as entrepreneurs, we start working and we get so excited about our business and we feel like, Oh, this is great. I never wanna retire or in some people, like, Hey, only ones for a few years saw this staying and then keep it moving. But either way, I want you to understand, As entrepreneur, we have retirement plan options as well. OK, we really dio So yes, you do need a financial plan and you can save for retirement even as entrepreneur and I know how a lot of times when people, you know decide to start a business, I think that's one of the first things that family members are concerned about their like, Oh, no, you won't have health insurance. Oh no, you won't have a retirement plan. It's like it's cool cause I'm gonna make so much money that I can fund all that stuff on my own. That's why I told my family so. But essentially, I want to make sure that each of you understand that you can create a retirement plan and create these specific benefits for yourself as well. So ...

the first thing that we talked about this before is setting financial goals. You need to have a financial goal in place when it comes to your retirement and to your financial plan as well. So that means you know, how long do you want to work? What are your goals? Are you looking to buy a house? Are you looking to, you know, have a baby? Do you want to relocate? All these different things in these specific financial goals are really going to be The leading factors are the determining factors of how you're gonna make moves financially as entrepreneur. And trust me, you could put money away starting today pre tax and after tax, just as if you did when you had a traditional 9 to 5. So some of the main things we have our Roth ira squirreling cave personal funds, these all can help support and fund our retirement. So there's a couple different retirement options that you had as a entrepreneur or as a self employed person. So one of the things which is really common is Ira and a Roth ira. So we're gonna go over the difference between that. Also a step ira and a solo for Okay, so I'm sure you've heard of IRA and a Roth IRA. So basically what? AI railways. It's an account that allows you to make contributions up to $5500 a year, and once you're over age 50 you can add an extra 1000. And essentially, once you put money into a IRA, you are able to deduct the amount that you are contributing to the account. Now with a Roth IRA, anything that you put in, you can take out completely penalty free Now with the regular IRA. Anything that you put in, you'll face a 10% penalty if you withdraw it before retirement age, which is 59 half. So that's why Roth IRAs or Super popular. Because anything issue put in, you could take out completely penalty free, which is awesome. And so, let's say, if you decide to drop $55 into Ah Roth Ira today and the next week, you're like, Hey, I want to like, you know, go to Bora Bora. For whatever reason, you can actually take everything that you put in completely out penalty free. But let's say if your account jumps from 5500 to 6000 so you have $500 earnings. That means that she would have to pay a 10% penalty on Lee on the earnings, which would be that $500 which is really cool. And another upside to the Roth IRA is it's all after tax money, which means that once you do hit retirement age, which is 59 half, you do not have to pay taxes on any of the money that you put in or any of the earnings that you've had to date in that account, which is awesome, which is also why they only that you put in $5500 a year now. This amount can change year after year. So make sure that you're always checking with the financial institution to confirm that the maximum contribution is still 5500 because it does change over time. Another really great place you to save his arch manure is a step IRA and step are raise air very popular because it allows you to contribute a lot more. So, basically, is 25% of your of the income or compensation or up to $51, which is awesome, so that allows you to put way more money into an account than you could with a separate and even also with a traditional for a one K. So you also have your solo for a one K now, for one case, are probably one of the more popular retirement accounts. But the cool thing and a lot of people don't know is that you can actually have a solo for a one K just for yourself. Now most people think that you could only have one through your respective employer, but you can set one up just for yourself so you can go to your brokers firmer, where every year your holding your investments and say, Hey, I want to set up a solo 41 K just for myself and with this one, you can contribute 80,000 employing contribution. But you can also do profit sharing as well, from your business up to 53,000. So and obviously these amounts do change year after year based on the irises rule, so make sure you verify with with your investment firm, whatever banker, using how much you can contribute because they do change your year over year now, when it comes to all of these different retirement accounts, You want to make sure that you're aware of any financial penalties for moving funds around or taking funds out early. And what what will happen for a lot of people is like I said, Listen to all the financial experts say here will start dropping money into a retirement account and then they'll need to take the money out. And like I said earlier, the only account that you can put money in and take it out penalty free is with your Roth IRA. All the other accounts, which are putting money into you're going to face a 10% penalty in addition to whatever your current tax bracket is to take that money out. So example. If you decide to put money into even a solo 41 K you decide you need the money. I don't know. Six months a year from now, you're gonna pay that 10% penalty, plus whatever your tax bracket is. And let's say if you're in the 20% tax bracket that's a 30% 30% penalty you're gonna face off the front, so I always tell people, don't start saving for retirement until you can afford to save for retirement. If you don't have your emergency fund in place and you don't have enough money to get you through the next few weeks, then putting money aside for age 65 makes no sense, right, so make sure you're thinking about that as well. So if you have old retirement plans from previous jobs or things of that nature, which most people dio, you want to make sure that your consolidating those so basically what that means is rolling them over. So if you have old 41 K from a previous job or 43 B or foot 4 57 retirement account, depending on where you used to work out, you can go on open up a retirement account or a rollover IRA at a bank of your choice. Such a TD Ameritrade E Trade, Charles Schwab Scottrade Whoever you bank with Fidelity, whoever it may be and roll those funds over in the purpose of rolling these funds over is that now you have complete access to this money on your own, and it also gives you the ability to invest in more options than you typically could through your through your employer's retirement plan. Now, when you roll this money over, don't roll it over to your checking account where a lot of people go wrong. Because, like I said, you're gonna face all those penalties that we talk about. You could be losing minimum 10 maximum, probably 40% of the money that you're rolling over. And you do not want to do that unless you're under extreme circumstances. So make sure that you're rolling this money over to a rollover IRA and make sure that you're speaking with a financial professional in the company s rolling it over to it and make sure that you have the process down. You're doing it right. You're not facing penalties and losing and wasting tons of money. Now, how much do you need to retire? This is probably a question I get all the time. Like Dominique. How much do I need, How much I need? Why ever be able to retire and the number could be kind of scary, But I think it's very doable if you start early. And if you start small and just start it was possible. So the first question that she want to ask yourself when you're trying to figure out how much you need to retire is how do you want to live in retirement? What do you want your lifestyle to be? Is it you, you know, hanging out on the beach, you know, kind of being a beach bum and just chillin paying $34 a month and rant in a hut, which is totally cool? Or is it staying? Are living in a big city such as New York or San Francisco, where the rent or your mortgage can be a little bit higher? Or are you looking to move away and leave the country and go to Bali, where expenses or lower all these things have a huge impact on what that magic number is going to be for your retirement? This is also why the earlier you start planning If you're buying a home, you know you have that 30 years to pay off your mortgage or 15 years or whatever it may be by that, hopefully, by the time you hit retirement, you don't have those expenses, so your goal should be as you're preparing for retirement is making sure that you can work and get your expenses down lower and lower and lower as you get closer to retirement. And that is how a lot of people are able to retire early. Now, when you're thinking about how much you're gonna need, I want you to first think about like I said, What you want your life's out to be. But also think about how much money are you making now? Okay, now, if you're making let's say I don't know 60 or $50, a year, let's just say and you're spending that entire $50,000 a year and you don't see those expenses going away. That's about what you're going to need in retirement. Okay, so if you're able to let's say, make 50, you're only spending 30,000. That's amazing in getting into the habit of living within your means. If you're a full time employer, action or whatever, maybe is going to be the key for you one building wealth, but to for you to ever be able to actually retire and stop working. So you want to look for that 70 to 90% okay, so 70 to 90% of your current income is how much you're going to need to how much you're going to need from your savings and your Social Security to replace in retirement. Okay, so 70 to 90% of whatever you're currently making is what, your savings and Social Security. If that's still around, you're going to need to replace. So think about that number. Now, I'm gonna give you an exact calculation to determine what you're going to need a retirement. So, as we mentioned earlier, you need to know your annual income need. I'm going to start there so your annual income need. So let's say in this situation it's gonna be $50,000. So let's say if you say, Hey, Dominique, I know I'm gonna need at least $50,000 a year while I'm in retirement every single year, and this is a tricky one. So it's like what you're expected, How many years you think you're gonna be a retirement, right? How many years you think you'll be retired? So let's say you decide. You retire at 50. You're like, Hey, most people my family lived to 80. We'll just go with those numbers. So that's a 30 years that you're gonna need your retirement money toe last you. So essentially, you take 30 years by $50,000 a year. That's 1.5 million. That's your magic retirement number. So that means that for you to retire at 50 or whatever your specific time is, you need 1.5 million, which means that your savings account and you're so security needs to be altogether equal about 1.5 million so that you can live through your retirement without going completely broke. So this is the number that you need to sit. So look for now, don't let this number completely freak you out. As I said earlier, when it comes to retirement in saving in general, it's all about starting small, starting early and living within your means, and you'll be able to reach all of your financial goals and make yourself a priority and make your future a priority. The earlier you start saving the better. Trust me. The earlier you start saving the better. Thank you again So honey book increase live for having me here today. It's been such a awesome experience. Hopefully you feel so much more comfortable with your finances if you need more information. Please check me out at Dominic Broadway or in the website dominate broadway dot com. Thank you.

Class Materials

Free Bonus Material

How to Run Your Business Like a Boss
Finance Resource Guide

Ratings and Reviews

a Creativelive Student

The information is good but still very basic. Good tips from time to time but nothing you cannot find surfing in the web. Still I deem this to be a very good point of start for somebody trying to initiate a business in USA.


Wow! What helpful information!

Carlos Figueiredo

Thank you for the insight!

Student Work