How to Prepare for Retirement as a Small Business Owner?

Whether you are a salaried professional or a small business owner, you may hang your boots at some point in life. At this juncture, the salaried employees, especially those working in government organisations, may find it a little easier to deal with their finances as they may be entitled to receive a pension. However, if you are a business owner, you wouldn’t have such a privilege. Hence, you must start thinking of a retirement plan from a young age and invest a small amount consistently towards your retirement corpus. 

Here are a few retirement plans that you can invest in to secure your future and accomplish your long-term goals. 

Public Provident Fund

Public Provident Fund or PPF can be an excellent investment option to secure your post-retirement life. It is a long-term savings scheme backed by the government that offers you triple tax benefits. The amount you invest in the PPF account, the interest you earn, and the maturity proceeds you receive at the end of the investment term are all tax-exempt. 

You can open a PPF account with any bank or post office and deposit a small amount periodically as per your business cash flow. PPF comes with a lock-in period of 15 years, and the government of India decides the interest rate, which could be revised every quarter. 

At the end of the investment term, you can either withdraw the amount along with interest in a lump sum or extend the investment period in the blocks of five years. PPF guarantees capital security and gives fixed returns; the interest does not depend on the market performance.

National Pension System 

Another popular retirement plan that you can consider investing in is the NPS. As the name suggests, NPS allows you to get a regular income after retiring by offering you a monthly pension. You must contribute a small amount periodically to your NPS account throughout the working years and get a pension after maturity or when you attain the retirement age (60 years). 

The amount you invest in NPS is invested in different money market instruments like stocks, equity funds, debt funds, government bonds etc., to generate valuable returns. And the amount you invest grows with compounding effects. This means you can create a significant corpus in the long run. 

One of the best features of NPS is that after maturity, you can withdraw 60% of the corpus in a lump sum and use the balance amount to purchase an annuity and get a regular pension. This helps you be financially independent during your golden years. 

Equity mutual funds

In India, mutual funds are one of the most popular investment vehicles. You may have irregular income as a business owner, but you can start a SIP and invest a small amount every month in equity funds. 

While such funds carry a certain level of risk and the returns are market-linked, it has high returns potential in the long run. Historically, equity mutual funds have offered valuable returns. Hence, it is better to stay invested for a long time, and you would have better chances of accumulating a sizeable corpus that you can use for your post-retirement expenses. 

Apart from the above options, you can also consider investing in other retirement schemes like a pension plan, senior citizens savings scheme, national savings certificate, etc. 

Final Word

When you invest in any retirement plan, you must be careful about your choice and invest in a plan that suits your risk appetite and financial goals. 

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