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02.08.24

How Business Owners Plan for Retirement

Owning a business can be an exciting, rewarding endeavor that often comes with its own challenges and successes. One complex issue that many business owners have to navigate is how to retire and maintain their lifestyle in the golden years. According to industry research, the majority of business owners say they're not on track to have the money they need for retirement and that they are concerned about their ability to save enough to maintain their lifestyle in retirement.

Since business owners often spend much of their working lives building and investing into their passion, it can leave them behind when it comes time to retire. Of course, ideally the business will be so successful and have such a solid succession plan that retirement will be taken care of easily. However, many business owners have discovered that having all their retirement focused in one place can be risky.

If you’re a business owner who is ready to get serious about retirement, it’s time to think strategically and get a plan together. To start with, consider these five questions:

  1. What will your business look like after you retire?
    You’ll want to have a clear vision for your business, especially when it comes to your role after retirement. Maybe you will have a clean break, but if you want to stay on in a consulting role, it's important to plan for that.
     
  2. What is your investment program?
    You’ll want to keep your assets diversified, so make sure you have a plan for investing. Maybe it starts with $100 a week, investing in a diversified portfolio of indexed funds or exchange-traded funds, and then increase as profits increase. By simply investing $400 a month starting at age 30, it’s possible to accumulate more than $2 million by age 65 (assuming an average rate of return of 6 percent).
     
  3. What retirement accounts are you using?
    As a business owner, you’ll have multiple options for your retirement plan. Some will even give you the ability to contribute up to 25% of your net income on a tax deductible basis.
     
  4. How are your assets set up to grow?
    The earlier you start, the longer you will have until you retire, which means the more risk you can assume. That can help you achieve long-term growth. With proper asset allocation and broad diversification, it’s possible to achieve stable, long-term returns.
     
  5. What is your exit strategy?
    When the time comes to completely separate yourself from your business, do you know all the exact steps you’ll need to take? Your plan will need to address your financial needs, options for getting cash out of the business, tax implications, and a post-business income plan.
     

It’s important to consider all of these questions as a business owner, so that you will know what you need to be doing to properly prepare for retirement. If you have any more questions, please reach out to one of our Wealth Management advisors to make sure that you have all your bases covered. Or, for more information, check out this webinar with helpful information from the experts at Atlantic Union Bank.

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