Every business owner knows that running a business is more than a full-time job. Depending on the size and structure of the business, an owner may serve as everything from salesperson to production manager, to office manager, to client services representative and then some. With all of that on their plates, it’s no wonder successful owners soon learn setting priorities is essential to success. So many business owners get caught up in the necessity of maintaining the profitability of their business, especially in today’s economic climate, that they tend to overlook the need to plan for their eventual exit from the business.
Sometimes the reality of the situation doesn’t hit home until they are ready to consider retirement and, for the first time, finally realize that neglecting the situation may have changed the path of the future. The once enticing prospect of a successful and relaxing retirement spent on a beach or with family suddenly crashes into the reality of time lost and goals suddenly seem unreachable. These same people never saw the train coming or realized it was moving too fast and now they have a hard time getting out of the way.
There is a retirement company that had a commercial depicting a 500-pound gorilla sitting in the corner of the room being ignored by everyone. There is no better analogy for retirement funding. We know the problem looms but put it off because there are more pressing daily issues to tackle and we believe there is plenty of time to deal with it later. Sooner than later, there is a lot of catching up to do. In order to get started early enough to meet retirement goals, business owners need to bring the same level of enthusiasm to planning for retirement as they do to running the daily company operations. The first step is to anticipate and understand future needs. Most important, make a commitment to investing in retirement.
Convince yourself that retirement is as important as running the business. Ultimately, the priority being served by keeping your business healthy and successful is YOU. Of course, there are many important questions to consider, such as: When do I want to retire? How will I fund my retirement and how much money will I need given my lifestyle? Will I have to change my lifestyle? Will I have the ability to sell my business or do I want to pass it along to my family? Asking and answering these questions will help set those essential retirement goals.
For most owners, the key concern is having enough money to maintain a comfortable lifestyle after retirement. The question then becomes, “How do I get there?” Fortunately, there are a lot of options for funding retirement. Unfortunately, because of the variety of retirement vehicles, many business owners feel overwhelmed and continue to put off making plans for the future. Time is an essential factor in any investment strategy, and any owner who feels “lost” when it comes to planning for retirement should seek expert advice. This involves sitting down with a certified financial planner and/or retirement specialist who can do an analysis of long-term goals and what it will take to get there. An honest approach must consider whether the goal is even realistic.
A financial specialist can also help business owners consider important factors such as company size and profitability, as well as whether the owner has a desire to share retirement benefits with employees. The evaluation of these factors will allow a qualified retirement specialist to provide a recommendation that is best suited for the business and its owners.
How do I choose the best plan for me?
Planning for retirement depends on an individual’s goals and the size, structure and profitability of the business. Consequently, there is no single best retirement plan. It is not a “one-size-fits-all” proposition. Therefore, the business owner’s goal should be to discuss the situation with a financial advisor who can help determine the plan (or plans) that best fits the owner’s and the company’s needs. Among the factors an employer should take into account are:
- What is the maximum amount I can afford to invest?
- What setup or administrative difficulties exist for different plan types?
- How expensive will the plan be to administer?
- What are the tax advantages (or disadvantages) of various plans?
- What level of commitment am I willing to make to my employees and their retirement?
After careful consideration of these issues with a financial consultant, an individual can set out to explore specific options.