For small business owners, saving for retirement requires intentionality, discipline, and planning, Inland Northwest financial professionals say.

“A lot of small businesses are really just trying to get through the day-to-day, and planning for retirement is a long-term goal,” says Monica Wales. “Oftentimes, it’s on the back burner.”

Wales owns Spokane-based Coaching Freedom, a personal financial coaching business. Additionally, she and her husband, Kent Wales, own Happy Laundry & Dry Cleaning, at 3724 E. Front in east central Spokane.

“A lot of times we think, ‘Okay, well my small business is my retirement plan. I’m going to sell my small business someday. I’m going to make a lot of money, and then I’m going to retire,’” she says.

She says, however, that it’s not always that simple.

Sarah Carlson, financial life manager and owner of Spokane-based Fulcrum Financial Group LLC, serves many small business owners, including some who are the sole employees at their businesses. For a small business owner, saving for retirement comes with both challenges and opportunities, she says.

“When you’re a small business owner, you’re usually the last person to get paid,” says Carlson.

Retirement is an afterthought for some small business owners.

“The big mistake a lot of small business owners make is they put everything back into the business,” says Carlson.

Some owners will invest into more equipment or other facets of their business before they invest in themselves and their families, and that makes their business a “concentrated asset.”

“Just like investing in your portfolio, the more diversified you are, the more you’re protected when things don’t go as planned,” she says.

As those businesses become more successful and cash flow improves, opportunities arise for business owners to save for retirement.

Carlson says small business owners can set up 401(k)s, but there are other plans that have less costly administration fees associated with them.

Owners can put some benefits in place in which they are the recipient, for example SIMPLE or SEP plans, she says.

A SIMPLE plan, or Savings Incentive Match Plan for Employees, allows employees and employers to contribute to traditional individual retirement accounts, or IRAs, set up for employees.

A SEP plan, or Simplified Employee Pension plan, allows employers to contribute to traditional IRAs set up for employees.

“Those are where you can take money on the top and put it aside for yourself and your employees on a pre-tax basis,” Carlson says.

Another opportunity for small business owners, Carlson says, is buying commercial space for their business, rather than renting it.

“If you get to a point where instead of paying someone else rent, you buy the space and pay yourself rent, that’s a very good way of diversifying your assets and benefiting,” she says. “And that’s treated as a separate business and that has different tax benefits for it.”

Once a small business has the cash flow that can justify it, Carlson suggests some could pursue a loan through the Small Business Administration to buy a space to operate out of or store inventory.

“Those small business owners get more favorable terms than other borrowers,” she says.

In addition to the real estate then becoming a passive income stream, it is also an asset that a small business owner can someday sell, potentially contributing to their retirement.

Ryan Heacock, financial planner and owner of Spokane-based Fellowship Financial Planning LLC, agrees that investing into real estate and building an additional asset can be a good option for a small business owner.

Investing into and growing a business in general, can be beneficial to an owner’s retirement goals, he says.

“Sometimes, it’s a sellable type of business,” Heacock says. “They can grow that business and sell it in the end when they retire.”

Like Carlson, Heacock also works with small business owners.

Some of them, he says, are discouraged because they don’t have a retirement savings plan in place.

He reminds them, however, that they have 100% ownership in a privately held company.

“The best stock they can invest into is their own,” he says.

Heacock says it takes more discipline to save for retirement for small business owners. They have other expenses to worry about, or may not make enough in sales one month, or may want to set money aside for emergencies.

For some owners, it’s just a matter of forming a habit of saving, he says.

“You’re willing to pay the rent because you have to do it. It’s just the cost of doing business,” says Heacock. “Well, sometimes saving for yourself for retirement is just the cost of doing business.”

Heacock and Carlson both say that more small business owners should prioritize saving for retirement.

“Small businesses are the backbone of America,” Heacock says. “There’s a lot of people that are working the hardest and sacrificing the most but not saving properly.”

While challenges do exist for small business owners trying to save for retirement, especially considering the volatile nature of owning a business, there are some distinct advantages as well, Carlson says.

“You have more control over what type of plan, how much you put away, and how you choose to invest it,” she says. “Having the ability to control what you do, when you do it, for as long as you do it, is huge.”

That flexibility is something Wales sees as an advantage as a small business owner.

Wales is an advocate of people “living out some of their retirement before they’re retired.”

“I actually would love for people to take more two-week vacations and retire later,” Wales says. “That’s my preference.”

She notes, however, that there is some risk behind that strategy.

“If you’re trying to build your business and you’re traveling the world every six months, that might be hard, depending on the business that you’re in,” says Wales.