The thought of retiring may be intimidating for anyone—but if you own your own business, handing your "baby" to new owners might be enough to stop you in your tracks. What might you do to set your successor up for success? What should all business owners know before they go?
Set Specific Retirement Goals
When you retire, you want to be running to something—not from something. And after years of operating your business, moving to a slower-paced, less-structured lifestyle might seem very appealing.
However, you probably need some structure, and setting specific goals may be the way to get there. For example, you may decide you want to spend more time on your hobbies. Instead of letting that wish stagnate, you might make a point to set aside a day or two each week to devote to your hobbies.
Plan to Turn Your Business Over
One of the biggest potential dangers during a business transition is failing to cut the cord when warranted. If the business founder/seller remains overly involved in the business, this might stifle growth and send mixed messages about who is in charge. Though there is nothing wrong with staying close for a few years to answer questions, once you exit, it is probably wiser if it is clean. Make—and stick to—a succession plan to manage complications.
Set Up Your Support Team
Adjusting to retired life may be tough, especially if you also wind down your involvement in a business. You may need a strong team of professionals—retirement, tax, legal, and possibly others—to help you stay on track and manage any financial trouble. Working with financial professionals may help ease the transition to retirement, even if you do not require the services of all these financial professionals every year.
Ensure Your Savings Are on Track
Many business owners re-invested their retirement assets back into their businesses. This strategy might make retirement tricky, especially if these assets need extraction first. This example gives a good reason for adequate diversification of non-business retirement savings. Your portfolio might benefit from sufficient diversity by holding growth and value investments. If you have the financial capacity to contribute to a Roth IRA, this type of retirement account may be a good way to manage taxes on income and growth on all invested assets.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax-free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
This article was prepared by WriterAccess.
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