Running a moderately successful business gives you access to enough income to sustain yourself, whether you’re paying yourself a salary or are relying on annual profits generated by the business. But since you own and run the business, you won’t have access to an employer-sponsored retirement program—or at least not one in the conventional sense. 

How can you make sure you have enough money for retirement? 

High-Level Considerations 

First, you should know there are a few potential options you could strive for: 

  • Soft retirement

You could “retire” while still staying involved with the business. For example, you might step down from the position of CEO, but maintain an advisory presence, attending meetings periodically and staying in touch with your best clients. You might also hold onto your shares of ownership in the company, or continue drawing a small salary. 

  • Selling the business

You could also sell the business outright for a lump sum, using the 4 percent rule (or something similar) to allow that lump sum to provide for you for the rest of your life. Of course, there’s no guarantee you’ll have an interested buyer, and even if you do, you may not have enough money to secure the lifestyle you want. 

  • Accumulating savings over time

The most reliable way to get the money you need to retire is to accumulate it gradually over time. The earlier you start this, the more you can take advantage of the power of compound interest. This is an even more powerful strategy if you harness the power of some of the retirement plans available to you as an entrepreneur, such as a custom pension plan or a SIMPLE IRA. 

The best strategy is probably a combination of these options, since they aren’t always mutually exclusive. 

Making Your Money Work for You

If you’ve sold the business or if you’ve managed to accumulate enough savings to meet your living expenses indefinitely, you’ll need to manage that money appropriately to make sure it can outlast you. These are the products and strategies that can help: 

  • Term deposits

First, you could use term deposits, which offer a fixed rate of return for your money with a guarantee that your initial principal is secure. You’ll be required to keep the money in the account for a specific amount of time, like 1 month or 3 years. Once the account reaches “maturity,” you can collect your principal back along with a fixed interest rate, usually something in the 2-3 percent range. It’s not as high-growth as a stock investment strategy, but it’s one of the safest things you can do with your money. 

  • Dividend-paying stocks and index funds

If you’re interested in nurturing your funds for more growth, you could invest in well-established, dividend-paying stocks. Buying stock associated with big, firmly established companies (blue chips, e.g., Coca-Cola or Disney) sharply decreases your risk of long-term losses, and will probably yield a substantial base rate of return over several years. Even more importantly, many of these companies pay dividends, or quarterly profit distributions to their shareholders, oftentimes in the 1-4 percent range. If you diversify your holdings with an index fund that aggregates many dividend-paying stocks together, you’ll lower your risks even further. 

  • Annuities

 An annuity is a financial product that guarantees regular payments to the purchaser. There are many different varieties available to retirees, but the most common works like this: you’ll pay a lump sum of money upfront in exchange for a guaranteed paycheck for the rest of your life (e.g., $1,000 a month). It’s highly secure, but is typically associated with a low rate of return. 

  • Rental properties

 If you have experience in the real estate market, you could also consider purchasing a rental property. The idea is to find a property where you can collect rent in excess of your ongoing expenses, resulting in a profit—and you can always sell the property if you need to raise the cash or bail on the investment. The trouble for most retirees is that rental properties tend to be a lot of work. 

  • Diversification

No matter how you plan on retiring, it’s important to diversify your assets. There are risks and limitations associated with every financial product and every investment strategy, so pursuing multiple investments and potential streams of income is the only way to balance them.

Retirement looks a little different for every entrepreneur. Some will be able to sell their business for millions and retire at a young age. Others will want to stay involved in the business even in their senior years, collecting ongoing profits or a small salary in exchange for their post-retirement contributions. Whatever your goals, it’s important to have a plan—or else even your successful business won’t guarantee a stream of income to you forever.