Retirement Strategies for Business Owners
1.Balance Reinvestment in Business with Retirement Savings
Many business owners rely solely on their business's value for retirement savings. However, this strategy comes with numerous risk factors that could impact their retirement plans. Questions about the actual market worth of the business, potential buyers, and potential business failure can arise. Therefore, it's crucial to simultaneously reinvest in the business while seeking ways to build retirement savings outside of it. Explore options like group retirement plans that benefit both owners and employees, as well as individual retirement savings vehicles independent of the business. Diversifying retirement savings away from the business's value can reduce retirement risks and enhance investment diversity.
2. Build and Secure the Value of Your Business
Despite efforts to expand retirement savings beyond the business, it's likely that the business will still be the primary component of your retirement plan. Hence, safeguarding its value is paramount. Establishing buy/sell agreements for partners, creating succession plans, and considering executive bonus plans for key employees are effective methods to enhance and protect the business's value for your family's future.
3. Prepare Your Exit Strategy
Successful exit strategies begin with meticulous planning. It's essential to contemplate how and when you intend to exit your business. Various paths exist, including selling to the highest bidder, transferring ownership to key employees, or passing it on to your children. Each exit plan requires specific planning to achieve the desired outcome.
Defining your goal is the initial step towards strategic planning. For instance, if selling the company to a key employee is the objective, consider implementing an executive bonus plan to incentivize their commitment. Similarly, if selling on the open market is preferred, incentivizing key employees to remain during the sale can add value to the business. If passing the business to children is the plan, consider how they will acquire the business from you while ensuring you can extract value for your retirement while gifting the business.
Every business owner is unique, necessitating tailored plans and strategies. If you want to discuss your specific plan and how Insight Asset Management can assist, feel free to reach out at any time.
Matt Tuft CFP® - matt.tuft@insightassetmgmt.com 303-902-8885
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.