How startup entrepreneurs can save for retirement (seriously)

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Sean Kevlahan is the 26-year-old chief executive of Quad Technologies, a Beverly startup that makes a dissolvable magnetic hydrogel used to harvest stem cells. He has to juggle product development, business strategy, and a social life. So it’s fair to say Kevlahan has a lot of things on his mind.

Retirement isn’t one of them. And he says most entrepreneurs in his position aren’t thinking about saving for the golden years, either.

“Retirement is not something that we look towards,” said Kevlahan, who told me he does save money but doesn’t have a designated retirement account. “We’re betting that the value we build with our startup companies is really going to seed our future. That’s what I think the mentality is.”

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Kevlahan and I are the same age and I, too, give little thought to retirement planning. The difference is I’ve taken a more conventional career path — working for a well-established business — with means I at least have a company-sponsored 401(k) account that I throw a few bucks at.

So how can all you entrepreneurs avoid falling too far behind? (You know, on the off chance that your startup doesn’t grow into a billion-dollar company, ensuring that you’ll never have to worry about finances again.)

There are a couple options, according to Deborah DiVerdi Carlson, a partner at Boston law firm Posternak Blankstein & Lund who counsels business owners on retirement planning.

Sole proprietors can create one-person profit sharing plans that allow them to stash some income and defer tax payments until age 70.

“The benefits of a profit sharing plan for a single person are that it’s very cheap to set up and it’s very flexible,” Carlson said. “They could put away money one year, and the next year not put anything away. For the entrepreneur who wants to put something away on an inexpensive basis, they’ll be able to do it and not pay taxes until they withdraw the funds.”

Carlson added that a profit-sharing plan has a higher annual contribution limit than an IRA — as much as $51,000 — which is ideal for an entrepreneur who may struggle to save for a while, then want to take advantage of a good year.

For startup teams and young businesses that are adding employees, Carlson recommends something called a SEP-IRA.

“It’s a simplified employee pension plan,” she explained. “The benefit to the entrepreneur is they can exclude employees who have not worked with the company for three years. They want to incentivize employees to be loyal to the business because turnover is expensive, but the reality is a startup existence is not for everyone and there may be some turnover. So this is a way for the entrepreneur to put away money on a tax-deferred basis for himself or herself, and for those employees who have been loyal.”

There you have it. Start saving, and I’ll see you on the golf course in 2058.