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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 legend@legend-financial.com.


INDEX
  • Now Is A Perfect Time To Open A New Business
  • Do You Know If Your Business Really Is Small?
  • 4 Estate Issues For Business Owners
  • Self-Employed? Map Out Tax Details
  • 10 Easy Steps To Take If Opening A New Business
  • To Buy Or Not To Buy: That Is The Business Franchise Question
  • Ever Considered Helping Your Adult Child Open A Business?
  • Do You Know What Kind Of Business Not To Open?
  • Do You Plan To Move Your Business To A New State?
  • Dispel These 7 Popular Myths About Retirement
  • 4 Retirement Plan Options For Your Small Business
  • Are Stocks Overpriced And Forming A Bubble?
  • 4 Steps To Creating A Dynamic Business Budget
  • Can An Underfunded Small Business Startup Be Successful?
  • What Happens If You Have Excess Capital Losses?
  • This Is Not Granddad's 'Defined Benefit Plan'
  • Despite Much Pessimism, Slow Growth Persists
  • How To Take Your Section 179 Deduction To The Max
  • Squeeze More Out Of Bonus Depreciation Deductions
  • A Common Error In Powers Of Attorney
  • For The Self-Employed: 4 Retirement Plan Choices
  • Which States Are The Most Friendly To Businesses?
  • How Economic Myths Distort Investment Outlook
  • Don't Forget About Roth 401(k)
  • REITs: A Great Diversification Investment
  • Shopping For A Bank Account That Pays The Highest Possible Rate Of Interest
  • The Twenty Top Tax Breaks In The New 2010 Tax Act
  • Investing Defensivley Does Not Mean Deserting Stocks
  • 401(k) Alternatives For Business Owners
  • Tax Court Okays Deducting Cost Of MBA
  • Employers Find Ways To Mitigate Liability On 401(k)s
  • Working Longer: What's A Post-Retirement Job Worth?
  • Slash Taxes By Swapping Like-Kind Assets
  • Transferring The Family Business To Your Heirs
  • Business Owners Get Big Tax Cuts In Recovery Act
  • Move Fast To Corral Emergency SBA Loans
  • Risk Management
  • Estate Taxes And The Obama Administration
  • Gifting A Business Can Cut Estate Taxes
  • A Little Bond Logic Yields Insights
  • Avoiding The IRA Rollover Crackdown
  • Ruling Cites Business Owner Responsibility to 401 (k) Plans
  • Ruling Cites Business Owner Responsibility to 401(k) Plans
  • How Much Is Your Business Worth?
  • Managing Cash Flow In Tight Times
  • When Times Are So Scary, Opportunities Emerge
  • Avoid Being Accused Of Insider Trading
  • Lifecycle Funds May Pose A Hidden Danger
  • Funding A Friend's Business Venture
  • Beware Of Social Security Identity Theft
  • Regulatory Guidelines Update
  • Small Business And Work Opportunity Tax Act
  • The Oil Patch Profit Squeeze
  • Free Credit Reports Available Online
  • Understanding the Importance of a Fiduciary Standard
  • Energy Systems Scale and Timeline
  • Timber As A Liquid Investment
  • Timber Facts
  • Emerging Market Food Consumption Growth Equals Rising Prices
  • Bank Loan Funds - A Primer
  • Ethanol: Salvation or Panacea?
  • Emerging Market Food Consumption Growth Equals Rising Prices
  • A Primer On Managed Futures
  • Identity Theft: What Documents Should You Shred Or Store?
  • The Case For Industrial Metals
  • Total Credit Market Debt (All Sectors) As % Of U.S. GDP
  • Know The Score
  • REITS: A Very Good Portfolio Diversifier, But Should You Invest In Them?
  • Does Investing Internationally Still Diversify Your Portfolio
  • Another Way To View The Current Valuation Of REIT Sector
  • Understanding Risk-Preparing For The Unseen
  • Bank Loan Funds: A Great Fixed Income Investment As Interest Rates Rise
  • What Is Shorting Expense?
  • How Dangerous Is A Dollar Crash?
  • How Volatile Can The Stock Market Be?
  • GMO 7-Year Asset Class Return Forecast Is Bleak
  • Too Many ''Phish'' In The Sea
  • Identity Theft In The New Year
  • Ways To Improve The Score
  • To Reinvest Or Not To Reinvest
  • Why Not Alternative Fixed Income Investments?
  • Just How Expensive Is The Market?
  • Beware of Brokerage Firms' Misconduct
  • Identity Theft : Correct Those Credit Reporting Errors
  • Risk-Controlled Investing
  • Q & A With Robert Arnott
  • Identity Theft : Applying For Credit? Better Check Your Credit Report First
  • Identity Theft: Everyday Prevention
  • Identity Theft : Help Is On Its Way
  • Identity Theft: Tips To Protect Yourself
  • Identity Theft : Don't Fall For That E-Mail!
  • Identity Theft : One More Reason To Protect Your Credit
  • Identity Theft: A Note About Social Security Numbers
  • What Do Rising Interest Rates Mean For Money Market Yields?
  • Exit Gracefully: How Business Owners Should Plan For A Comfortable Retirement
  • Section 529 Plans Are Popular But Not The Only Way To Go
  • The Importance Of Commodities In A Portfolio
  • A Tale Of Two Hedges
  • IRS Refuses Change Of Section 179 Election To Expense Depreciable Property
  • Small Businesses Need To Be Aggressive On Costs
  • Your Medical File Report May Need A Check-Up
  • Do It Yourself Tax Preparers Watch Out: Tax Answers From IRS Centers Oftentimes Are Incorrect And/Or Insufficient
  • Home Office Deductions: Hoops To Jump Through
  • Property Tax Challenges Should Not Be Overlooked
  • The IRS Will Follow Your Wealth To The Ends Of The Earth
  • Year-End Tax Defferal Planning
  • How To Find A Great Financial Advisor
  • Is It Time To Find A New Financial Advisor?
  • What Is Risk?
  • 4 Steps To A More Secure Investment Portfolio For Your Retirement
  • Traditional Investing May Decrease Your Retirement Lifestyle
  • Year-End Tax Planning Can Help Generate High Return On Investment
  • Businesses Receive Temporary Depreciation Bonus
  • Understanding Deflation
  • Is Your 401(k) Plan A Failure?
  • Succession Planning: Developing A Plan For Your Business
  • The ERISA Retirement Plan Law Spells Out Fiduciary Issues
  • Evaluating The Quality Of A Company's Earnings
  • Investing In Times Of Uncertainty And Risk: The Importance Of Diversification
  • Tax Issues To Consider When Buying A Long-Term Care Policy
  • Yesterday's Great Companies
  • Businesses Should Be Aware Of States' Use Taxes
  • Expanded Retirement Plan Contribution Limits Create New Opportunities For Business Owners
  • Succession Planning: Developing A Plan For Your Business



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