Retirement planning can be an exciting time for business owners, but it can also be a stressful one. While selling the business might generate enough income to sustain an entrepreneur through retirement, that’s not always the case. At Forbes, members of Forbes Finance Council, an organization for executives in accounting, financial planning, and wealth management firms, offered ways that business owners can protect themselves and their businesses once they retire.
Have an Exit Plan
Business owners must have an exit strategy in place. So, Mara Garcia from Phonexa Holdings advised business owners to plan for inevitable decisions, such as who will take over the business when they retire. There are also unforeseeable events that business owners must plan for, such as forced early retirement.
Construct a Diverse Portfolio
Many business owners reinvest their net profit back into their business but fail to sufficiently diversify. This puts their retirement at risk. According to Michael S. Schwartz from Magnus Financial Group LLC, business owners should allocate discretionary capital to a diversified portfolio of marketable securities, cash-flowing real estate, and insurance to hedge against premature death or disability.
Contribute to a Small Business Retirement Account
Many small business owners assume that selling their business will fund their retirement. But Jason Craig from IRA Resources Inc. asked, what happens when the business can’t be sold, or if things you can’t account for decrease the company’s value? Craig advised that contributing to a small business retirement account is a good way to protect a client’s future. Then, grow the account by investing in assets the client understands and can control.
Be Ready to Pay Expenses the Business Covered
Retiring business owners need to understand which of their ongoing expenses were originally covered by the business (such as car allowances and insurance). John King from Dakota Wealth Management pointed out that a client planning on retiring needs to know this in advance. Having answers to all these questions will prevent putting a strain on retirement income.
Outline a Transition Plan
Many business owners often look to preserve their reputations and their legacies through the businesses they’ve founded. So, it’s important to find a buyer who shares the founder’s values and appreciates the business’ culture, noted Brian Slipka from True North Equity Partners.
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For more news, information, and strategy, visit the Retirement Income Channel.