Shop owners retirement plans

converterking · Feb 24, 2016

In the previous thread about work hours, people have replied that they work a lot of hours so they will have enough money for retirement. What are other people planning for their retirement? I would think that you would own your shop and home so you had more than a couple of worn out machines to sell.

SND · Feb 24, 2016

I plan to be very surprised if I make it to that age.

I figure I'll work until I die, whether I still work cause I need the money or not when that day comes, that's the mystery. Though at the rate money is losing value, odds are pretty good I'll still need the income.

wgnrr1 · Feb 24, 2016

Shop owners can retire??? I thought we are all going to die at work. Maybe selling out and getting a Hot Dog Cart is a great retirement plan.

Seriously, I plan on working until I drop. Whether its in the shop or on the sawmill.

Josh

ewlsey · Feb 24, 2016

I have a Roth IRA. I rolled my 401K from my last job into it and I contribute what I can.

Seems to me that the standard small shop owner retirement plan is hoard a bunch of ancient machine tools that they think are worth a fortune. I'll bet most are sorely disappointed when the auction is over.

oldster · Feb 24, 2016

In my 70's I started working toward a nicely equipped hobby shop, but stuff got in the way

I accidentally created a much better product and they took off like a small plane. I now have grown from my garage to a 2100 sq foot shop with a multi axis lathe that thinks that it is a mill, and a 32x16 cnc mill.
Both of these are programmed by my programmer as I cannot even begin to do it. I have a small manual shop in the corner where I do the prototypes and short runs. this is equipped with a Lagun knee mill with nmtb40 spindle, and a Monarch 12EE.

These are my pride and joy.
Now, at 80,I still work seven days a week and do a fair amount of "messing around", but still am developing new products.
To some extent, I think that I have the best of all possible worlds. I don't have to work, but I enjoy what I do, and I am having fun.

The machines are all paid for, the lease is reasonable at .80cents/foot, there is an award winning winery across the street, along with a good coffee shop. The neighbors are great. What's not to like?

Lee (the saw guy)

PeteM · Feb 24, 2016

Typical small or one man shop won't have much equity in the business when they retire. Smart ones will have three other sources of retirement savings, four or five if they're lucky:

1) A SEP-IRA or equivalent with a significant amount of money in it.

2) The property (land and building) the shop is located in. This used to be the most valuable part of many shops. In some areas and neighborhoods real estate might still be a safe haven.

3) Regular contributions to Social Security. One trap here for sole proprietors is that the incentive is to show little or no income for years on end. But that eventually adds up to a meager SS check later on. Folks with 20+ years working for someone else at or near max contribution rates before going out on their own will do better.

4) If they've been lucky, a business with real equity in it (someone to take it over, products, IP, still-loyal customers, etc.)

5) A great marriage and a spouse with a decent job.

As Lee says, the real gift may be work you love and the health to keep doing it well past 65.

Newman109 · Feb 24, 2016

A major part of any retirement plan should be wiping out debt. That would include a house payment and car and other vehicle payments. I know lots of people who can't retire, even in their 70's because they still owe many thousands of dollars on a home loan.

Without house and car payments, assuming some savings have been accumulated during one's working years, retirement should be fairly straightforward. As long as outgo is smaller than income, you are good to go.

If this sounds simplistic, it worked for me. :popcorn:

Rock6.3 · Feb 24, 2016

Newman109 said:
A major part of any retirement plan should be wiping out debt. That would include a house payment and car and other vehicle payments. I know lots of people who can't retire, even in their 70's because they still owe many thousands of dollars on a home loan.

Without house and car payments, assuming some savings have been accumulated during one's working years, retirement should be fairly straightforward. As long as outgo is smaller than income, you are good to go.

If this sounds simplistic, it worked for me.

Please add one more item:
Credit cards to be paid in full EVERY month.
If you cannot afford to pay the bill when it arrives then you could not afford the junk you purchased.

kpotter · Feb 24, 2016

I hope to never retire but when I kick off the auction wont net anything my equipment is ancient. I have managed to pay off everything including the house and the building so my overhead is really low. The biggest bill I have is the shop electric bill at two hundred bucks. You dont have to make much if you dont owe anything.

Newman109 · Feb 24, 2016

Rock6.3 said:
Please add one more item:
Credit cards to be paid in full EVERY month.
If you cannot afford to pay the bill when it arrives then you could not afford the junk you purchased.

That's certainly true. I should have mentioned credit cards under the general heading of debt. Credit cards are a major issue, especially considering the very high interests that they carry. 19% is not unusual. Compared to the extremely low rates that banks and credit unions pay on savings accounts these days, credit cards loom large in decision making about retirement.

apt403 · Feb 25, 2016

I don't really have a right to post in this thread, considering my shop is only bringing in enough to amount to a couple extra paychecks a month right now, but stocks are where I'm at. Screwing around with day-trading, taking the proceeds and investing in more or less inflation beating blue chip companies that pay dividends. Combined with a modest weekly investment in EFTs.

Depending on what the IRS says I owe in capital gains at the end of the year, I'll look into maxing out IRA contributions in 2017. Go Alcoa!

Moriboy · Feb 25, 2016

I don't put all my eggs in my own basket, meaning I invest in things other than my business. Seen too many guys invest everything into their own shop later to see it fail..

Trboatworks · Feb 25, 2016

apt403 said:
Go Alcoa!

Yep- in at $6.17

A nice sell off and AA rallies nice once it gets going.

Retirement- what's that?.....

Oldwrench · Feb 25, 2016

For a job shop, I dunno. But for a product-based business, build it until it can be run by others while you have fun creating the new products. If everything in your life is pretty much paid for, you have the option of working instead of retiring, as long as it's still fun. Everybody I graduated high school with is retired. Or dead. Guess I'm bucking two trends here.

dkmc · Feb 25, 2016

Maybe I'll end up in the Lowes tool department as a Red-Vested mumbler.
When I cease animating, they'll stand me up in the corner as a static
display model...at least until I start stinking too much.
Other than that, I'm saving up to buy that one special lottery ticket...

TMP · Feb 25, 2016

ewlsey said:
I have a Roth IRA. I rolled my 401K from my last job into it and I contribute what I can.

Seems to me that the standard small shop owner retirement plan is hoard a bunch of ancient machine tools that they think are worth a fortune. I'll bet most are sorely disappointed when the auction is over.

Ewlsey if you own your shop that is incorporated and you don't have many employees if may be better for the company and you to offer something like a 401K being that it is tax deductible for the company. Might save you a bunch in taxes as the owner and also give you a way to get some company cash into your personal retirement account.

Ries · Feb 25, 2016

I have been self employed, or an employee of a corporation I own, since 1978.
For corporate reasons, and tax reasons, I pay myself a relatively small salary, and so my SS payments have been small.
But for probably 15 or 20 years now, if I possibly can, I max out my contribution to my IRA.
What kind of IRA you have depends on what your business structure is- for something like fifteen years, we have been an S Corp, which means my wife and I have a Simple IRA.
Current yearly maximum contribution is $12,500, and I try to hit that if I can.

I also own the building, and of course the machines, outright.
But money in the bank is a better thing to have than old machines, I think.

oldster · Feb 25, 2016

Perfect comment Oldwrench!

Mine is a product based business (I cannot even envision what you job-shop guys have to do every day to make payroll), and I had the opportunity to fail a few times so that I was able to learn from my mistakes and start again. Every one of these efforts has been from my own pocket.

I have had a long term vision of where I wanted to be when I grew up, and I think that I have arrived at that station in life. My have a perfect wife that puts up with me, the crew at the shop set their own hours and the work gets done.

I am so blessed to be where I am, and it is a pleasure to be here.

Thanks to all of you that "liked" my previous post.

Lee (the saw guy)

Oldwrench said:
For a job shop, I dunno. But for a product-based business, build it until it can be run by others while you have fun creating the new products. If everything in your life is pretty much paid for, you have the option of working instead of retiring, as long as it's still fun. Everybody I graduated high school with is retired. Or dead. Guess I'm bucking two trends here.

TMP · Feb 25, 2016

My father started our company in 1974 with a belt sander and drill press which he turned into a pretty decent sized metal stamping company, in 2009 at age 59 he "semi" retired and sold the company to four of us brothers. During his ownership taxes were much better to be able to build wealth. The four of us have taken the company to a point where we went from 60000 sqft in 2012 to 82000 now and once again looking to expand due to space constraints. Employee totals averaged around 45 for our father and we have been hovering around 70 the last two years. The battle of paying taxes and trying to save for expansion is not easy. At 33, retirement is years away for me so right now its all about building the company.

gorrilla · Feb 25, 2016

converterking said:
In the previous thread about work hours, people have replied that they work a lot of hours so they will have enough money for retirement. What are other people planning for their retirement? I would think that you would own your shop and home so you had more than a couple of worn out machines to sell.

While I DON'T own this shop, My retirement plan is a group of about 12 head of momma cows and a bull. They all think I'm Santa Claus because I give em a little bit of range cubes every time I see em, as long as they keep dropping calves every 11 months or so. IF it all goes according to plan, I should have a bit of retirement ranch to go along with whatever else I can find to do. All else fails, I can always eat my retirement. At least part of it.

Shop owners retirement plans

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