Plan For Your Business... And Your Retirement

As an owner or executive of a successful small business, you are constantly engaged in the day-to-day tasks necessary to drive revenue. As your business grows, so do your responsibilities and the demands to keep up with maintaining a larger company.

You want your enterprise to be successful. But too many business owners focus less on building their own wealth for retirement and more on their company's ultimate value when they retire.

In other words, they assume that selling or cashing out of their business will provide them with their retirement nest egg all at once. This is a dangerous assumption, for many reasons:

  • You cannot guarantee your company's continued prosperity or your continued health.
  • You cannot predict the selling price of your business.
  • You may face an economic downturn.
  • You may face broadened global and national competition, increasing supply costs, regulatory hurdles, insurance burdens, or labor shortages.

It is imperative to set up the most appropriate wealth structure, or retirement plan, for your company before you need it. As you get older, you minimize the opportunity to build wealth due to the time value of money—for instance, you lose the advantage of compounding interest.

By setting up a retirement plan, you not only lessen the risk of receiving a less-than-optimal sale price for your company, but, depending on your company structure and plan, you may also gain corporate tax relief.

First, consider how much income you will need to support your desired lifestyle, post-retirement. Next, determine your most appropriate pension/benefit plan. While a basic 401(k) or SIMPLE IRA plan may seem like the best option because it's the easiest, the suitability of these plans may be affected by the following factors:

  • Your desired funding levels
  • Number of employees
  • Current tax status
  • Retirement and compensation objectives
  • Desired tax benefits
  • Administration and service costs

The key is to start planning now. Evaluate all your financial assets, including your investments, insurance, and exit plan from your business. Check out your options with a financial professional who has expertise in this area.