Secure the Bag & the Future: Retirement Planning for Black Women Entrepreneurs

D. Shorter
Apr 2
4 min read

As a Black woman entrepreneur, you are not just building a business—you are building a legacy. But too often, while we focus on scaling our businesses, retirement planning takes a backseat. Unlike traditional employees with workplace pensions and 401(k)s, we must create our own financial safety nets. The good news? There are powerful retirement strategies tailored for entrepreneurs that will help you secure the bag—and the future.

One of the first steps in retirement planning is choosing the right retirement account. Let’s break down the best options, their pros and cons, and how they fit into your long-term wealth strategy.

Choosing the Right Retirement Accounts

1. Solo 401(k)

A Solo 401(k) is an excellent option for self-employed business owners without employees (except a spouse). It allows higher contributions than traditional IRAs and offers both pre-tax and Roth options.

✅ Pros:

High contribution limits—up to $69,000 in 2024 (or $76,500 if you're 50+).
Can make both employer and employee contributions, increasing savings potential.
Roth option available for tax-free withdrawals in retirement.
Loans available if you need access to funds before retirement.

❌ Cons:

Strict IRS reporting requirements once your plan reaches $250,000.
Can’t use it if you have full-time employees (other than a spouse).
More administrative work compared to an IRA.

2. SEP IRA (Simplified Employee Pension)

A SEP IRA is great for solopreneurs or small business owners who want flexibility in how much they contribute each year.

✅ Pros:

Higher contribution limits than traditional IRAs (up to $69,000 in 2024 or 25% of your compensation).
No annual contribution requirement—flexibility to contribute based on business performance.
Simple to set up and has fewer IRS reporting requirements.

❌ Cons:

No Roth (after-tax) option, meaning all withdrawals are taxed in retirement.
If you have employees, you must contribute the same percentage of their salary as you do for yourself.
No loan options—once funds are in, they must stay until retirement.

3. SIMPLE IRA (Savings Incentive Match Plan for Employees)

A SIMPLE IRA is ideal for entrepreneurs with employees who want an easy-to-administer retirement plan.

✅ Pros:

Low-cost and easy to set up.
Employers must match up to 3% of employee salaries or contribute 2% regardless of employee contributions.
No IRS filing requirements for the employer.

❌ Cons:

Lower contribution limits than a Solo 401(k) or SEP IRA ($16,000 in 2024, with a $3,500 catch-up for 50+).
Employer contributions are required, unlike a SEP IRA.
No Roth option—withdrawals are taxed.

4. Roth IRA vs. Traditional IRA

Both IRAs are great individual retirement options, but they differ in how they are taxed.

✅ Pros:

Roth IRA: Contributions are taxed now, but withdrawals in retirement are tax-free—great for long-term tax savings.
Traditional IRA: Contributions are tax-deductible now, reducing taxable income, but withdrawals are taxed.
IRAs are flexible and easy to manage, with lower contribution limits but strong growth potential.

❌ Cons:

Contribution limits are low ($7,000 in 2024, with a $1,000 catch-up for 50+).
Income limits apply to Roth IRAs (phase-out starts at $146,000 for single filers in 2024).
Required minimum distributions (RMDs) apply for Traditional IRAs after age 73.

5. Cash Balance Pension Plan

A Cash Balance Plan is a hybrid retirement account that combines a pension with tax advantages, making it a great option for high-earning entrepreneurs.

✅ Pros:

Allows for much higher contribution limits (up to $300,000+ annually, depending on age and income).
Provides tax-deferred growth and substantial tax deductions.
Can be used alongside other retirement accounts to supercharge savings.

❌ Cons:

Requires a long-term commitment with annual contributions.
Higher administrative costs and IRS compliance requirements.
Best suited for high-income earners with stable business revenue.

6. Indexed Universal Life Insurance (IUL)

An Indexed Universal Life (IUL) policy is a life insurance plan that builds cash value while providing tax-free retirement income.

✅ Pros:

Tax-free withdrawals for retirement via policy loans.
Cash value grows based on stock market indexes but with protection against market losses.
No contribution limits, unlike IRAs or 401(k)s.
Provides a death benefit for heirs, adding an estate planning advantage.

❌ Cons:

Requires long-term commitment and consistent premium payments.
Higher fees and costs compared to traditional retirement accounts.
Loans against cash value must be managed carefully to avoid policy lapse.

7. Annuities

An annuity is a financial product that guarantees income in retirement, making it a great option for entrepreneurs looking for stability.

✅ Pros:

Guaranteed income for life, regardless of market conditions.
No contribution limits, so you can invest as much as you want.
Tax-deferred growth, meaning you don’t pay taxes until you withdraw funds.
Options include fixed, variable, and indexed annuities to fit different risk tolerances.

❌ Cons:

Can have high fees and surrender charges if you withdraw early.
Returns may be lower than other investment options, depending on the type of annuity.
Some annuities are complex, requiring financial education before purchasing.

Secure the Bag & the Future

Building a business is just the beginning—securing your financial future is the real boss move. Whether you choose a Solo 401(k), SEP IRA, SIMPLE IRA, Traditional/Roth IRA, Cash Balance Plan, IUL, or Annuities, the key is to start now and stay consistent.

As Black women entrepreneurs, we have the power to create generational wealth and break cycles of financial struggle. Plan wisely, invest smartly, and ensure that your business success translates into lifelong financial security.