What are your retirement plans? Whether they involve grandchildren or travel or just taking it easy, odds are they've changed during the last few decades. Today's retirement has small-business owners rethinking everything from when it will begin to whether it will be more like shifting to part-time work than quitting altogether.
"Do-it-yourself 401(k)s, IRAs and multiple-choice Medicare supplement plans have taken the place of the company pension plan, retiree health benefits and a gold watch," reports Bankrate, "And working into retirement — in the form of a second (or third) career or part-time job — is becoming the norm."
Small-business owners must take a hands-on approach to preparing for retirement. Here are a few issues to consider when you are planning for the retirement you've always wanted.
Investing can be a tall order for small-business owners — not because they don't have the smarts or savvy to do it well, but because they simply don't have the time.
A New York Times article recommends a "keep-it-simple" approach to investing, which is crucial to preparing for a healthy retirement. When it comes to the market, reserve just 10 percent of investment funds for riskier stocks. With the rest, "construct a super-simple portfolio, one that requires little maintenance," states the article.
In addition, don't forget to invest in your own company along the way. Especially if your aim is to sell out in the end, it could be an important asset.
Don't make the mistake of flagging all savings as "retirement savings." If you do, you will likely have to pull from the retirement pot when unexpected expenses inevitably crop up. From paying for your kids' college to making major purchases, every dip into this account will only act to push your retirement date out farther.
Instead, personal finance expert J.D. Roth recommends creating a dedicated account for each savings goal.
"Anytime I have a new financial goal, I open an additional, targeted account," Roth wrote in Entrepeneur. "For me it is a powerful motivator. Because each account has a name and specific purpose, I have an added incentive to pay into it."
Planning for "your" retirement means planning for your family, as well. On the off chance you don't live until your retirement date, a trust can be a great way to ensure that your businesses can continue to run — and that your family will be taken care of.
"By planning now with a living trust, you can anticipate any uncertainties and account for them," states an article on Legal Zoom. "With a properly executed living trust, you can minimize taxes and even avoid many of the pitfalls that can ensue when there is no estate plan in place."
What will become of your business when you do step away? Many small-business owners assume that handing the company over to a relative will be an easy transition, but, in fact, it takes considerable planning.
According to the Small Business Administration (SBA), transferring ownership to the next generation can be complicated. Be sure to plan ahead to account for tax implications, such as estate and gift taxes, that generally apply. Early, proactive succession planning can ease the transition.
Selling Your Business
If you decide to sell your business, it's imperative to find out exactly what it's worth. Small business valuation can be done in a variety of ways, and doing it sooner rather than later can give you the time you need to find ways to increase the company's value before putting it on the market.
Once the business is ready for sale, the SBA advises small-business owners to consider a number of options when transferring ownership rights. Depending on your needs or your buyers' needs, an outright sale, gradual sale or lease agreement will be the best fit.
Though your retirement date may be years away — decades even — planning for a healthy retirement should begin today.
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