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15 Ways Retiring Business Owners Can Protect Themselves And Their Families

- May 31, 2022

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Retirement planning can be a difficult and stressful subject for business owners. The sale of the business alone might generate enough income to sustain an entrepreneur and their family through retirement—but that’s not always the case. There are steps that business owners can and should take to guarantee the future health of their business as well as their personal interests.

As you prepare for retirement as a business owner, it can be helpful to get sound financial advice from experts. Below, 15 Forbes Finance Council members share their best advice for protecting yourself, your family and your business once you’ve retired.

1. Develop An Exit Strategy In Advance

Business owners must have an exit strategy in place. Plan ahead for inevitable decisions, such as who will take over the business when you retire—will you sell it to an outside party or keep it in the family? There are also unforeseeable events business owners must plan for, such as forced early retirement due to health complications. Craft an exit strategy to protect your interests. – Mara Garcia, Phonexa Holdings, LLC

2. Set Up A Diverse Portfolio Prior To Retirement

A lot of business owners exclusively reinvest their net profit back into their business. They fail to adequately diversify and unintentionally put their retirement at risk. Owners should proactively siphon off discretionary capital and allocate it to a diversified portfolio of marketable securities, cash-flowing real estate and insurance to hedge against premature death or disability. – Michael S. Schwartz, Magnus Financial Group LLC

3. Make Sure You Can Afford Retirement

In order to be able to afford to retire, before selling your business, make certain that the net after-tax proceeds coupled with your previously saved assets will be enough to maintain your lifestyle after taxes, indexing for inflation. There can be internal sales and external sales. Seek out the assistance of a tax attorney and a merger and acquisition attorney. – Simon SingerThe Advisor Consulting Group

4. Don’t Rely Solely On Income From Selling The Business

It’s critical that business owners systematically “take the cream” off the milk by taking a portion of their salary through the business, as well as potential K-1 income to begin to fund their personal balance sheet with money to properly finance retirement. It can be catastrophic to solely rely on a business sale that may or may not happen to cover all potential retirement income. – Meredith Moore, Artisan Financial Strategies LLC

5. Contribute To A Small Business Retirement Account

Many small-business owners assume the sale of their business is what will fund their retirement. What happens when the business can’t be sold or if things you can’t account for (such as a pandemic) decrease the value of your company? Contributing to a small business retirement account is a good way to protect your future. Then, grow the account by investing in assets you understand and can control. – Jason CraigIRA Resources, Inc. (IRAR)

6. Ensure You’re Entering Retirement With A Good Credit Score

Make sure that your personal credit is in order. If there are any high balances on your credit cards, pay them down and put all your accounts on auto-pay to avoid any future late payments. Having a good credit score after retirement will also allow you to take advantage of any investments or opportunities that arise down the road, which can help you make more money and enjoy retirement. – Jose Rodriguez, Got Credit?

7. Have A Plan To Pay Expenses Previously Covered By The Business

When exiting or retiring from your business, you need to understand your ongoing expenses that were originally covered by the business (such as car allowances and insurance). A client who is planning on retiring or selling their business needs to have all these questions answered in advance. This prevents putting a strain on their retirement income and ensures that their exit strategy works throughout retirement. – John King, Dakota Wealth Management

8. Retain Outside Counsel

Retaining outside counsel to advise on the transition of governance will provide business owners the assurance of continued success. Without outside counsel, the responsibility can fall into the wrong hands—often second- or third-generation family members. Obtaining advice upon transition will facilitate continued success through retirement and will not interfere with family dynamics. – Daniel Kachani, Aria Wealth Solutions

9. Include Indemnification In Transfer Contracts

Your governance should be solid so that any questions about future liability are well-defined. This means that transfer contracts have to include indemnification for the outgoing owner at the deepest level possible. Clear retention or transfer of intellectual property rights needs to be documented as well. Traditional retirement planning may miss both of these protections. – Alpa Inamdar, AIG

10. Work With A Family Office

The sale of a business can present retirement challenges to business owners and their families. The infrastructure that coordinated financial affairs no longer exists, and the transition of managing such liquidity can present unexpected risks. Working with a family office provides specialized services such as tax management and coordination of investments, insurance and estate planning needs. – Sharon Olson, Olson Wealth Group LLC

11. Create An Updated Estate Plan

Business owners should create an estate plan, or if they already have one, develop an updated estate plan that at a minimum includes a financial and medical power of attorney and a will. Additionally, these documents should be stored in a secure and accessible location, so that trusted loved ones can act in an emergency. These documents protect business owners and their families from uncertain futures. – Renee Fry, Gentreo, Inc.

12. Draft A Thorough Transition Plan

Among the personal interests that many business owners seek to preserve are their reputations and their legacies, which are wrapped up in the businesses they’ve founded. Therefore, it can be important to find a buyer who shares the founder’s values and appreciates the business’ culture. A transition plan that involves transferring that culture and those values can be important to the founder. – Brian Slipka, True North Equity Partners

13. Protect Principal Equity

The most important thing to protect when selling a business is the principal equity. The equity needs to be diversified and invested across a minimum of 45 assets, all with a low, sub-3% chance of default. The investments also need to appreciate and generate dividends. The dividends can be used for daily expenses, and the appreciation can hedge against inflation. – Amariah Olson, Yield Crowd

14. Have A Sufficient Will And Adequate Insurance

There are two things business owners need to have in place to protect them in this scenario: a sufficient will and adequate insurance with respect to life, disability, long-term care and property-casualty. Once these steps have been taken, engaging with a tax advisor to discuss more advanced estate and gift-planning options to minimize the impact of estate and income taxes is also important. – Jeff Call, Bennett Thrasher

15. Make Contingency Plans

Make sure you can retire on your terms by planning ahead. Take advantage of the free valuations many firms offer, as knowing the worth of your business prepares you to make critical decisions when the time is right. Identify your priorities for potential buyers. Above all, be flexible and make contingency plans. It’s never too soon to start mapping out an exit strategy. – Amanda Dixon, Barney


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Asset class performance was measured using the following benchmarks: U.S. Large Cap Stocks: S&P 500 TR Index; U.S. Small & Micro Cap: Russell 2000 TR Index; Intl Dev Large Cap Stocks: MSCI EAFE GR Index; Emerging & Frontier Market Stocks: MSCI Emerging Markets GR Index; U.S. Intermediate-Term Muni Bonds: Bloomberg Barclays 1-10 (1-12 Yr) Muni Bond TR Index; U.S. Intermediate-Term Bonds: Bloomberg Barclays U.S. Aggregate Bond TR Index; U.S. High Yield Bonds: Bloomberg Barclays U.S. Corporate High Yield TR Index; U.S. Bank Loans: S&P/LSTA U.S. Leveraged Loan Index; Intl Developed Bonds: Bloomberg Barclays Global Aggregate ex-U.S. Index; Emerging & Frontier Market Bonds: JPMorgan EMBI Global Diversified TR Index; U.S. REITs: MSCI U.S. REIT GR Index, Ex U.S. Real Estate Securities: S&P Global Ex-U.S. Property TR Index; Commodity Futures: Bloomberg Commodity TR Index; Midstream Energy: Alerian MLP TR Index; Gold: LBMA Gold Price, U.S. 60/40: 60% S&P 500 TR Index; 40% Bloomberg Barclays U.S. Aggregate Bond TR Index; Global 60/40: 60% MSCI ACWI GR Index; 40% Bloomberg Barclays Global Aggregate Bond TR Index.