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May 20, 2022 / F&M Trust
Business Owners Need a Serious Plan for Retirement

Business Owners Need a Serious Plan for Retirement

Have you thought about retirement? If you’re like most business owners, unless you’re within 10 years of the normal retirement date, you probably haven’t given it serious thought. According to a study by American Express, 60 percent of business owners say they’re not on track to have the money they need for retirement, and 73 percent said they’re concerned about their ability to save enough to maintain their lifestyle in retirement.A man and woman stack coins and money to see if they have enough for retirement

It’s not surprising that business owners are typically late to the retirement planning party. Most spend the greater part of their business life surviving, building, and reinvesting in their venture with the hope that, one day, it will bear all the fruit they need. And it’s not at all uncommon for business owners to forgo investing in anything outside of their business because they feel that their business is their best investment -- much less risky than investing in the stock market.

The problem, as many business owners discovered during and after the Great Recession, is that, having all their eggs in one basket can set them back years should the business go south. Failure to diversify their assets is the main reason why many business owners near retirement age are unprepared and often forced into trying to sell or liquidate their business with unfavorable terms.

Getting Serious about Retirement

Business owners who are serious about achieving true financial independence need to begin thinking strategically about their retirement and take the essential steps to implement a solid retirement plan at the longest possible point in their time horizon. At a minimum, their plan should include:

  • A clear vision of life after their business. Maybe it will include keeping a role in the business, or maybe it will involve a whole new venture, or maybe it will be a clean break. Having clearly defined goals and a timetable are the keys to achieving financial independence on your terms.
  • A systematic investment program. 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).
  • Utilization of the right retirement accounts. Business owners have several retirement-plan options, some with the ability to contribute up to 25 percent of their net income on a tax-deductible basis.
  • An asset allocation strategy for growth. The longer the time horizon, the greater the ability to assume more risk – which is the key to achieving long-term growth. With proper asset allocation and broad diversification, it’s possible to achieve stable, long-term returns.
  • An exit strategy. Business owners need an exit strategy that clearly defines their objectives and the process for getting out of their business. It should address post-business financial needs, options for getting cash out of the business, tax implications, and a post-business income plan.

Business owners, who want to achieve financial independence, need a serious retirement strategy that considers all aspects of their business and financial lives. Waiting until the business is more successful or when you think you’ll have more time to do the planning may prove to be very costly. Your time is a wasting asset, so meet with a small-business retirement-planning specialist today.

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