For many, owning a business is the American dream come true, and making management decisions that grow your business brings about well-deserved feelings of accomplishment. Playing devil’s advocate here—did you decide to use any of your cash flow to fund your retirement investments?
According to CNBC, 78% of small-business owners plan to sell their businesses to fund anywhere from 60%—100% of their retirement. The biggest challenge for small-business owners is learning to divert their income from supporting their business to funding their retirement.
If you want to invest now and withdrawal later:
Choose the right retirement plan and stick to it. Options for investing include programs like a SEP IRA, Solo 401(k), SIMPLE IRA, Roth IRA, and a 401(k). If you stick to your contributions, all will grow your money, giving you something to rely on come retirement day. Start by investing a bit of your income in hiring a professional to manage your plan, so you aren’t bogged down with the complexities.
Opt for diversification and auto deposits. When it comes to retirement savings for business owners, opt for multiple opportunities. If you choose to launch SEP or SIMPLE IRAs for you and your team, don’t be afraid to start your own personal traditional or Roth IRA. Doing so diversifies your portfolio. Additionally, set up a plan that makes auto deposits to avoid the temptation to skip investing and put your money back into the business.
If you choose to use the money from the sale:
Get an accurate estimate of your business value. Your business value is determined by reviewing tangible assets, employees, future cash flow potential, and the value of comparable businesses that have recently sold—much like when you prepare to sell your home. Take your estimate and compare it to the dollar amount you believe you need to retire comfortably. Doing this will reveal if selling can fully fund your retirement or if you need a contingency plan.
Plan now for your future sale. You need a plan today that identifies your ideal buyers and outlines any changes necessary that’ll make your business attractive to them in the future. Changes should include equipment upgrades, staff changes, financial improvements, and identifying business growth opportunities—all of which will make your business more appealing to the right buyer.
Banking on the sale of your business to fund your retirement shouldn’t be your only plan as a small-business owner. There’s no crystal ball to display the future profits from the sale, but our team of financial professionals can show you how to invest now for guaranteed profits during your retirement. Chances are you have questions, and we’re ready to help. Call us today at (540) 720-5656.
Adapted from Business News Daily1
Amy Anderson joined the ILG Financial team in 2023 as the client relations coordinator. Her responsibilities include scheduling of appointments, annual check-up notifications, and annuity and required minimum distribution assistance. She is a graduate of Harding University with a degree in Computer Information Systems. Amy and her husband have two children and she enjoys reading, crocheting, music and spending time with her family.
Chase Lopez joined the ILG Financial team in 2020 as an advisor. Chase is a 2016 James Madison University graduate with a degree in management. Chase has been trained under the tutelage of Dave Lopez, who is not only the founder and managing member of ILG Financial, but also is Chase’s uncle and godfather. He also enjoys working alongside his cousin, Megan, who is Dave’s daughter. Chase, as a fiduciary, believes in putting his clients interests first, and building out plans for his clients where they can have a happy and fruitful retirement. He married his beautiful wife in February 2022 and both use most of their free time chasing around their little pup, Aurora.
Jessica Carson joined the ILG Financial team in 2018 as an agent. Jessica and her husband have four children, two dogs, 3 barn cats, 5 chickens, and three parakeets. She indeed loves her children and pets! When not at work, Jessica enjoys playing the piano and cello as well as traveling and spending time outside with her family, hiking, fishing, and boating.
Terri Center joined the ILG Financial team in 2019 as client services manager. She handles client records, application processing, and gathering information to provide a professional and friendly experience with all of our clients. Terri is a graduate of Oakland University. She is married and has two children. She enjoys hiking, family time, and puzzle challenging video games. She also likes to share her creativity in her canvas paintings and sewing projects.
Megan Jones joined the ILG Financial team in 2020 as marketing director. Megan and her husband live in Fredericksburg, VA with their German Short Haired Pointer, Gus. Megan is a graduate of Longwood University and holds a degree in communications. Megan is the oldest of Dave Lopez’s three children and not only enjoys working alongside her father, but also with her cousin, Chase, who joined the ILG Financial team in 2020 as an advisor. When not at work, Megan enjoys sitting on the back porch with family and friends enjoying food and music.