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Exit Gracefully: How Business Owners Should Plan For A Comfortable Retirement

Retirement planning, business owner-style.
When a business owner decides he or she wants to retire, it involves more complicated issues than those faced by non-business owners.  Business owners generally have a significant portion, if not all, of their assets tied up into one illiquid investment: their own business.
Consequently, it’s much more difficult for business owners to determine when they can retire.  To make this process smooth, one must plan years in advance of his or her anticipated retirement date.
One of the key elements of retirement planning is to determine how to dispose of the business at retirement.  Planning should begin at least five to 10 years prior to the closing of the business.  Options include selling the business to heirs, fellow shareholders or partners, key employees, strategic partners, outsiders, or even taking the business public.
To make the company more attractive to a potential buyer, the smartest move is to use a business valuation expert (sometimes an accountant serves this function) who specialize in determining what the business is worth and how to increase its value.
One way of making a business more attractive to buyers is to systematize it and make it independent of the owner.  Oftentimes, a business falls apart if something happens to its owner because the business is solely dependent upon the owner’s efforts.  Obviously, this is not attractive to buyers.
Michael Gerber, renowned author and speaker, has a number of publications and self-study courses that teach entrepreneurs how to systematize their businesses.  Information can be obtained by calling (800) 221-0266.
The next phase of financial planning for retirement has to do with the non-business-related aspects.  This phase should probably begin at least 20 years before retirement.  If the business owner has not begun this phase, he or she may need to get on the fast track to catch up.
Such planning involves setting an anticipated retirement date and working backward.  One thing most individuals do not plan for is the amount of time they will live during their retirement years.  For an individual who has a spouse of a similar age, life expectancy charts state that one of the two will live to approximately age 90.  Unbelievable?  In fact, the fastest-growing segment of the population is over age 85.  This also assumes no further improvements in health care for the next 30 to 50 years, depending on one’s age.
To adequately fund their retirement, business owners need to maximize contributions to their retirement plans.  With the varieties and types of plans available, there is almost no excuse for an established business not to have a retirement plan.
A key concern for most individuals is the amount of financial assets they need to have available at retirement to fund their living needs.  It is best to use the services of a financial planner to crunch the numbers, incorporating all the key variables involved in that calculation, and to determine how the money should be invested.
Ascertaining how much a business owner currently spends for his or her family’s living needs upon retirement is essential to a realistic retirement calculation.  Potential sources of income, such as investments, retirement plans, part-time wages and Social Security, are also factored into this calculation.  Other variables, such as taxes, debt payments, expenses, and inflation, should be included as well, resulting in an amount that needs to be saved at various rates of return.
Be forewarned:  An individual who is more conservative in his or her investment strategies will need to accumulate even greater amounts of money.
In summary, there are a number of decisions to consider when a business owner plans for retirement, some of them quite complicated.  Many entrepreneurs have been do-it-yourselfers for the majority of their lifetime, which is how their businesses became successful in the first place.  However, when it comes to planning for retirement, an entirely new set of skills is required.  Their team of advisors can supply this skill set.
For further information, contact Louis P. Stanasolovich, CFPtm at (412) 635-9210 or e-mail him at

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