retirement fundThis blog post is made possible by Sara Stringer, site supporter.

More and more women are choosing to start their own home-based businesses every day (and, before you ask, yes—writing books is totally its own home business). The thing about running your own business is that figuring out your retirement becomes more complicated. Suddenly you're dependent upon every penny you bring in for your daily life and retirement feels like a pipe dream. What's more, there's no employer matching your contributions to your retirement account. You are in charge of doing everything yourself.


In addition to working later in life (a Small Business Administration research study showed that the average age of retirement for entrepreneurs is 72-73 while traditional employees typically retire between 68-69), a lot of entrepreneurs take for granted the idea of being able to sell a successful business later in life for a windfall profit and using that profit to fund their retirements. Don't be one of those entrepreneurs! There is zero guarantee that a business that is wildly successful this decade will be in the same demand three or four decades from now.


For most entrepreneurs, it is the Individual Retirement Account (IRA) around which their retirement revolves. There are eleven types of IRAs, but among all of those the two that are most applicable to your situation are the Traditional IRA and the Roth IRA.

Traditional IRA

A traditional IRA is set up like a regular savings account. You make regular contributions to the account. The primary benefit of choosing a traditional IRA is that the contributions you make to this account are tax deductible. In the case of an entrepreneur, this means that they reduce your income tax liability which, in turn, lowers the amount of tax you owe at the end of the year.
This doesn't mean, however, that the money you tuck away in a Traditional IRA is 100% tax free. The withdrawals (called distributions) you make later, during your retirement, will be subjected to taxation the same way a regular income would be.
Another benefit to the traditional IRA is that, if you're under the age of fifty, you can contribute pretty much however much you want (as long as it doesn't exceed the amount of money you claim as income on your taxes) each year. This gives you the ability to "beef up" your account if you start saving later in life. 

The Roth IRA

Kiplinger's says that one of the smartest things a person can do while she is still young is to set up a Roth IRA for herself. Unlike the Traditional version of the IRA which allows you to contribute money to the account "before" taxes now, the money you contribute to a Roth account is contributed "after" taxes have been figured out. What this means for you, the entrepreneur, is that the money you contribute to your account won't lower your tax liability now.

But! When you do start taking withdrawals (getting distributions), it won't be subjected to taxation because, technically, you've already paid taxes on that income. This means that however much you save up is how much will be distributing to you once you reach the age of 70.5 (that number is subject to change).

You can also continue to contribute to your Roth account even after you've started taking distributions which isn't true with most other retirement accounts.

There are lots of things that make the Roth IRA a great investment—especially for entrepreneurs like yourself. If you've already opened a Traditional IRA or set up a SIMPLE IRA while you were still someone's employee, don't worry—you can convert the account to a Roth IRA. Go here to read more on why converting to a Roth IRA may be right for you.

Saving Money Now Even When It's Hard

Knowing that you need to save for retirement is one thing. Making yourself actually put money into an IRA is different. It sometimes feels like you're taking food out of your own mouth, especially while your business is still young and not bringing in a lot of money. That doesn't mean that you can ignore the need to save up for retirement.

There are articles all over the place that are filled with tips for saving as much as possible for retirement. For now just remember this: even five dollars a week is better than contributing nothing at all. You can increase the money over time and then, when you get to that magic age (currently 70.5) the sacrifices you make now will well have been worth it.


Sara is a freelance writer who enjoys blogging about lifestyle, relationships, and life as a woman. In her spare time, she enjoys soaking up the sunshine with her husband and two kids.


"Retirement" image courtesy of huena reality /