TRANSCRIPT:
Running a construction company has unique challenges, especially when it comes to cash flow and saving for retirement. These are the top strategies I recommend to the majority of my construction company owner clients. Hi, I’m Hunter Brockway, founder of Boat Retirement Strategies, here to guide you to a successful, stress-free retirement while spending more and avoiding being killed in taxes. As a construction company owner, I understand it can be challenging for you to begin saving for retirement due to the ebbs and flows of construction demand alongside the need to keep cash in the business due to construction businesses being cash hungry. It is important, however, to be saving for your retirement beyond the growth of your business. All too often, people put all their eggs in one basket, their business, but at the end of the day, the market doesn’t want to pay you what you feel like your business is worth. Additionally, it’s more important to start investing than to wait for the perfect time.
The power of compound interest shows us that money invested sooner grows faster to higher end values than money invested in larger amounts later in life. As a business owner, you have a few strategies to save for retirement through your business. You could open a 401k, a solo 401k, a step IRA, a simple IRA. They all have slight nuances and different contribution limits and rules. The most common strategy I see small companies select is the simple IRA. The pros of the simple IRA compared to the rest are the ease of establishing, the lack of HR work and reporting, and the ability to invest in the broad markets as opposed to being locked into funds and are a lower cost option. On the downside of simple IRAs, they have a contribution limit of $16,000 annually or $17,500 over 50 compared to the $23,000 of 401k or $30,500 if over 50 or the much higher contribution limits of $69,000 in a step IRA.
The simple IRAs also require employer contributions to employee plans, whereas 401ks don’t require them. Simple IRAs require a dollar-for-dollar match up to 3% of the employee’s salary. I would say, however, that use that as a tool for attracting and retaining key employees. Of course, it is tax deductible as well. SEPs have a much more aggressive percentage-for-percentage match of what you contribute to your own play. If you don’t want to run any play through your business at this time, you can also open an individual account outside of the business in the form of a traditional or Roth IRA.
These have much lower contribution limits, but are at least a starting point. And the strategy to help with that nuance of cash flow, you can open an investment account in the corporation’s name. Now, instead of moving money back and forth or letting money sit idle in a savings account, you can build an investment account inside of the business. From there, you can build up a portfolio of usually stable investments so you can maintain cash in the business whenever you need to bridge the gap while waiting to get paid for change orders or delays from the client but also put your money to work. Take action. Get your retirement savings started. Create a strategy to help alleviate cash flow problems and subscribe to our YouTube channel. If you have any financial questions feel free to reach out at contact at BocaRetirement.com. I’m Hunter Brockway, founder of Boca Retirement Strategies. Enjoy your successful retirement and thank you for watching. Bye.
