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Posted: 1:40 p.m. Tuesday, May 1, 2012

Many entrepreneurs not saving anything for retirement

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By Clark Howard


How confident are you that you'll ultimately be able to retire in comfort? If your answer is "very confident," there are not a lot of people like you!

USA Today  reports that a third of all entrepreneurs and small business owners aren't saving anything at all for their retirement. Now, you as a small business owner might say, "Well, I'm reinvesting in my business and that will build my retirement" Maybe, but maybe not.

Here's what I prefer you do. As a self-employed person, you have access to a simplified employee pension (SEP). The paperwork to set up a SEP is simple, and you can typically open it wherever you want -- at a low-cost investment house, for example -- at no cost.

SEPs work like a traditional IRA or a 401(k), with a current year tax deduction, but withdrawals are taxed at retirement. They also offer flexibility, in that you can put in nothing in a year or as much as $49,000. That can be really helpful during the feast or famine years when you're launching a business.

If you're not self-employed, you probably still aren't saving enough to be prepared for retirement.

My executive producer Christa is turning 40 this year and she was asking me for retirement advice. While I took issue with some of her investment choices, I was proud of how much she's managed to save relative to her income.

Christa began saving a mere two percent of her salary when she was 22 at the suggestion of her then boss. But she soon changed jobs and got a higher salary, so she made the leap to saving a whopping 15 percent and never looked back!

Unfortunately, her story is unique. Seventy percent of Americans by our own admission say we're not on track to be able to retire and will have to work longer than we'd like.

So the idea of saving steady as you go early on like Christa did is great, but don't feel bad if you are mid-career and haven't saved anything. Just start now and start small and then gradually build it up.

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