You’ve worked hard to build a successful business, which has likely contributed to growing your personal wealth. Now that you are establishing financial success, it’s important to consider how you can manage and invest your funds effectively for long-term security.
Here are some key wealth building strategies that can help you manage and protect your wealth.
A great way to start organizing your investments is by reviewing your traditional IRAs. If you haven’t already, think about converting them to Roth IRAs. Roth IRAs allow for tax-free withdrawals during retirement, which can be especially advantageous if you anticipate being in a higher tax bracket later in life. While you’ll pay taxes at the time of conversion, you’ll avoid taxes on your retirement withdrawals.
Are your children earning income from legitimate work at your practice? Consider opening Roth IRAs on their behalf. Contributing early to their retirement provides the benefit of compounding interest, giving them a head start on long-term wealth building.
Leaving excess business funds in a low-interest checking account could mean missing out on growth potential. Explore alternative options with your banker, such as high-yield savings accounts or money market accounts, which may offer better returns while keeping your funds accessible.
Putting idle funds to work can help increase your financial flexibility down the road.
Another smart investment option is a college savings plan, such as a 529 account. These plans come with tax advantages when the funds are used for qualifying education expenses, and your contributions have the potential to grow over time.
With the rising costs of higher education, starting a 529 plan early can be a proactive way to prepare for future tuition expenses.
Now that we’ve explored some wealth-building ideas for you as an individual, let’s consider how you can support your employees’ financial futures and further help your own.
Offering a company retirement plan helps your team save for the future and can also provide your business with valuable tax benefits. If you don’t offer a retirement plan, you may want to consider implementing one, as you could be eligible for the Retirement Plan Startup Costs Tax Credit.
This tax credit helps offset expenses related to setting up a new retirement plan, including plan setup, administrative fees, and employee education. Businesses with 50 or fewer employees can receive a credit covering 100% of eligible startup costs, while those with 51 to 100 employees can claim 50% of eligible costs. In both cases, the credit is capped at $5,000 annually for the first three years.
Additionally, businesses that include an automatic enrollment feature can qualify for an extra $500 per year for three years. To take advantage of this tax credit, businesses can file IRS Form 8881 with their annual business tax filing.
It’s important to stay aware of potential tax law changes and how they could impact your wealth-building strategy. Work with your advisors so you can make timely adjustments to your plan, maximize tax efficiency, and protect your wealth.
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