Retirement Planning for Business Owners | Retirement and Pension Plan

How to Structure a Retirement Plan if you are a Business Owner?

  Explore smart retirement planning options tailored for business owners to secure your future beyond the workplace.

Written by : Knowledge Centre Team

2025-08-03

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8 minutes read

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If you own a business, you are likely to stay active in it for as long as possible. Unlike corporate or government jobs that have a fixed retirement age, you have the flexibility to work without such limits.

However, no matter how passionate you are about your work, there will be a time when you may want to take a step back. That is why retirement planning is important for business owners as well. In this blog, we will explore the most effective retirement planning options to help you secure long-term financial freedom and sustain your lifestyle.

Key Takeaways

  • As a business owner, you can work beyond retirement age, but having a retirement plan ensures you can step back when you choose.

  • Separating business and personal finances helps you save more efficiently for retirement.

  • Diversifying across PPF, NPS, ULIPs, and pension plans builds a balanced and secure retirement corpus.

  • Creating a succession or exit strategy can turn your business into a source of post-retirement income.

  • Investing at least ₹2.5 lakhs in ULIPs and the rest in NPS optimises tax benefits and ensures steady long-term growth.

Why Do Business Owners Need a Dedicated Retirement Plan?

As a business owner, your financial journey is different. Your income may fluctuate, and your personal wealth is often tied to your business. Unlike salaried professionals, you may not have structured retirement benefits. That is why a dedicated retirement plan is essential to protect your future.

  • Business Income is Not Permanent: Your earnings may rise or fall based on market trends, client activity, and operational success. Once you retire, the business may not provide consistent income. A personal retirement plan gives you stability even when business income stops.
  • Your Business is Not a Retirement Plan: Many business owners plan to use their business as their retirement fund. But the business may not sell when you expect, or the value may fall. A retirement plan ensures your future is not affected by unexpected challenges.
  • Personal Finances Need Protection: Mixing business with personal finances can lead to confusion and reduced savings. A separate retirement plan helps you protect your personal finances. It also ensures you always have funds set aside for your life goals.
  • No Employee Benefits Means You Must Plan on Your Own: As a business owner, you are not entitled to benefits like a provident fund or pensions. You must take the initiative to build your own retirement safety net. A dedicated retirement plan helps fill this gap and protects your future.
  • Higher Financial Risk Requires Extra Safety: Business owners often reinvest their profits into the business. This increases risk and reduces personal wealth. A retirement plan gives you a way to grow your personal savings without depending on business success alone.
  • A Peaceful Retirement Needs Preparation: After years of hard work, you deserve a peaceful retirement. A well-planned retirement fund allows you to enjoy your time without stress. It provides regular income, covers medical costs, and gives you full control of your financial life.

Retirement and Pension Plans for Business Owners

As a business owner, you can safeguard your retirement by investing wisely. Your savings must grow over the years. Investing in the following options can help you create a good corpus that you can use to live on after you retire from your business.

  • Public Provident Fund (PPF): This is one of the safest investments that you can make with your money. A PPF scheme not only helps you save but also offers interest on your money. This scheme is offered by the government; hence, it is an extremely secure and trustworthy instrument to invest in.

    Here are the things that you need to know about PPF:

    1. The current interest rate is 7.1% per annum (w.e.f 1st April 2020).
    2. You can invest a maximum of ₹ 1.5 lakh in a given year.
    3. The term of PPF is 15 years. This can be extended by another 5 years after maturity.
    4. PPF is one of the few investments that enjoys an E-E-E status. This amount is exempt at all three stages: investment, interest, and maturity.
  • National Pension Scheme (NPS): The NPS or National Pension Scheme is a common retirement saving scheme for employed as well as self-employed people. It is a market-linked investment scheme. In this scheme, you can invest your money in market-linked funds such as debt, equity, etc.
    So, there are no fixed returns in NPS; these depend on the market performance of your assets.

    Here are the key features of NPS for retirement planning:

    1. You can choose to invest by opting for one of the 2 options: Auto and Active
    2. In the active fund option, you need to decide in what ratio your funds will be invested.
    3. The auto option works on pre-defined guidelines.
    4. NPS matures only after you retire or the age of 60.
    5. You can only withdraw 60% of the value after retirement. The rest is to be invested in an annuity.
    6. It  is eligible for tax benefits u/s 80C and 80CCD (2)

Note: Tax benefits are subject to change in tax laws. Please consult your tax advisor.

  • Unit Linked Insurance Plan (ULIPs): It is a type of life insurance policy with rich investment features. If you invest in ULIPs for your retirement planning, you can invest in the market and grow your fund’s value. At the same time, your life is also financially covered. 

    Key features of ULIPs for business owners' retirement are as follows:

    1. ULIP combines the benefits of both insurance and investment in a single plan.
    2. You can invest in pure equity, pure debt or hybrid funds within the same plan.
    3. You have the option to switch between funds multiple times.
    4. You can get automated portfolio management for aggressive investors.
    5. You can get the tax savings benefits after the lock-in of five years. 

You can invest in the fund option as per your risk appetite and preference.

Note: Promise4Growth Plus by Canara HSBC Life Insurance offers life cover, low policy charges, and return of mortality charges at maturity. It includes premium funding benefits, flexible payment terms, 12 diverse fund options, and multiple portfolio strategies.

  • Pension Plans: A pension is the income that you receive after retirement. In a pension plan, you need to invest regularly while you run your business. From this, a regular income stream will be created for you after you retire.

    Pension plans are of many types:

    1. Deferred Annuity Plans: With this plan, you invest your money and will start receiving income at a later date.
    2. Immediate Annuity Plans: Here, the regular payouts start immediately after your contribution.
    3. Pension with Life Cover: These are the plans that are from life insurance companies. A lump sum amount is given to the beneficiary if you die during the term.

Annuity plans from Canara HSBC Life Insurance offer you guaranteed benefits and ensure a regular income stream for you.

  • Mutual Funds: It is a type of investment fund that is created from the money invested by a large number of investors. This cumulative fund is then invested in market securities to earn returns. There are various types of mutual funds available.

    1. Equity Mutual Funds: You invest in company stocks to aim for long-term capital growth.
    2. Debt Funds: You put your money in bonds and fixed-income assets for steady, low-risk returns.
    3. Liquid Funds: You invest for the short term and can access your money quickly when needed.
    4. Hybrid Funds: You get a balanced mix of equity and debt to manage risk while aiming for growth.

Mutual funds have no certain limit or period of investment. Thus, you can use these funds to invest even after your retirement. This will keep your money working.

Structuring Your Retirement Savings

Now you know the various options you can invest in to plan for your retirement, here are some tips that can help you structure your savings.

How Much Should I Invest?

The answer depends on a lot of factors, such as your current and future expenses, goals, present income, liabilities, etc. However, as a small business owner, you should try to invest at least 20% of your income.

As a business owner, you are likely to be at more risk than a person who earns a regular salary. So it is even more important to safeguard your future. 15-20% is the ideal amount you should contribute specifically for retirement.

Allocation in Different Investments

You should not be dependent on only one investment to plan your retirement. Diversification is necessary to build your wealth. Investing in multiple assets also helps you limit your risk.

While planning for your retirement, you need to invest in a retirement and pension plan that offers you the safety of your corpus as well as an option that offers you maximum growth.

You should invest at least ₹ 2.5 lakhs per year in your ULIP plan, this is because ULIP are tax-free if the premium is less than ₹ 2,50,000 in a year. The rest of the amount should be invested in NPS. You can select the auto option to get steady growth and minimal intervention.

Conclusion

Smart retirement planning empowers you to enjoy financial freedom beyond your business. By investing in a mix of ULIPs, NPS, PPF, and pension plans, you secure steady income and protect your lifestyle. Canara HSBC Life Insurance offers trusted solutions tailored for business owners. Start now, build consistently, and retire on your terms with confidence and peace of mind.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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