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Balancing your business, retirement goals

It’s a day most business owners both dream about and dread: retirement. To get to this milestone, you’ve put in long hours, sacrificed time with family and friends and dealt with customers who don’t pay and vendors who don’t deliver. Transitioning into the next exciting phase of your life should be the easy part, right? Not always.

When the deal closes, the biggest financial event of your life happens in this one meeting. But will you be able to fulfill your dream of a financially secure future? You’ll either have all the money from the sale (if your deal is all-cash), a good chunk of it with more to come (hopefully) or a down payment along with the promise of a stream of payments over time (usually the case in a sale to family or employees).

If you’re like many business owners, you’re probably in one of two camps about what comes next:

• You’ll want to prepare, learning as much as possible about how to manage the cash you’ll be receiving.

• You’ll deal with issues when the cash actually comes.

Either way, the choices you make will have a profound impact on your life in retirement. That’s why you must take your time before moving forward.

Your business may represent your largest asset and the foundation for the money you will need in retirement. These taxable assets, along with whatever you’ve set aside in IRAs, will need to generate sufficient income to last 20 to 40 years. How will you ensure your money goes the distance?

For starters, you need to understand what it will take to create the lifestyle you want for retirement. After years of focusing on wealth accumulation and the day-to-day cash flow needs of running a business, the challenge is to think in terms of drawing down those assets to provide a reliable stream of income that can last as long as needed. That’s why business experts suggest developing a plan that coordinates your business transition and retirement goals. Among other things, its goal is to determine a sustainable income that will ensure financial security and the realization of your dreams.

Most business owners do not have a tremendous amount of investment cash at their disposal while they’re growing a business. The sale of a business may change that significantly.

The thought of handling this by yourself may be intimidating. That’s why you may want to consider working with a financial professional — someone who can show you how to maximize the proceeds from the sale of your business, based on hypothetical investment returns and withdrawal rates; explain various investments, so you can choose those that align with your long-term goals and risk tolerance; help you structure an asset allocation strategy for your portfolio, monitor your portfolio’s performance over time and help you make adjustments as your goals and needs change; and identify and fill gaps in your financial and estate planning.

Consider working with a business transition expert who has the resources to answer more than just the investment management aspect of your wealth. Retirement income distribution planning, estate planning, family gifting and legacy, charitable planning, and medical and long-term care planning are all areas that should be integrated into your overall plan.

Armstrong is a wealth management advisor with Northwestern Mutual. To contact him, call 970-328-7526, email ken.armstrong@nm.com or visit ken-armstrong.com. This information isn’t intended as legal or tax advice. Northwestern Mutual doesn’t offer all services in this article.


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