Retirement Planning: Seven Tips for a Meaningful Life After Exiting Your Business

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  • Many former small business owners embarking on retirement quickly realize that their identity was at least partially tied to their occupation
  • A sound retirement plan focuses on wealth preservation and taxes, of course, but also hones in on non-financial issues that are often overlooked
  • Knowing and embracing your mission once you’ve moved on from life as an entrepreneur is critical to living out a successful retirement

Small business owners often stress over how to transition ownership as typical retirement age approaches. There are several strategies to maximize value, and we’ve touched on the most common ones in our other writings. There are intricate financial implications and key steps to ensure that no matter which path you choose, no steps are missed.

But what comes next? What if you have successfully monetized your business ownership to a partner, another industry organization, a private equity group, or your next of kin, and now find yourself at a hazy crossroads, unsure of your next move? This dilemma commonly strikes entrepreneurs in the early innings of their retirement. That’s why having a life plan post-running a business is so important. Let’s explore key considerations for small business owners like you ahead of your golden years.

1.      Keep Your Strategic Hat On

Research shows that the more your mind stays active, the better your many years of retirement will be. Under that umbrella, treat your personal finances as if you are still a small business owner. Map out a strategic vision with detailed steps and intermediate-term objectives aimed at preserving your wealth, yes, but also list what brings you true joy. That might involve taking aspects from your life as an entrepreneur and rejiggering them to suit your retirement ambitions.

Here’s what I mean: If you ran a successful real estate business, you surely possess a wealth of knowledge about how to go about building practical developments for your community. Could you take that wisdom and devote it to missions or charities close to your heart?

Shifting back to the dollars and sense, be sure to work with a quality planner, be it with us at Clear Harbor or otherwise, to take stock of your finances. Upon a business exit, chances are your personal balance sheet looks quite different from what you were used to. A close look at your assets, liabilities, and anticipated retirement income streams is critical to ensuring that your needs and ambitions are funded.

2.      Make New Goals

Naturally, the next step is to make some goals. C’mon – you’re probably a Type-A and will thoroughly enjoy this part. Traditional work-life is done, and now personal priorities should be your focus. Define what a purposeful retirement looks like to you.

Weigh factors like your ideal lifestyle, travel wants, and healthcare needs, and even look way ahead to what your legacy should be. I encourage clients to get creative and delve into their souls to determine what brings them positive energy and intellectual stimulation – doing so helps properly frame retirement. All of these facets can be planned for, and it begins by making purpose-driven goals.

3.      Develop an Income Strategy and Practice Happy Spending

We mentioned earlier how cash flow streams are important. Even if you have ample liquidity and an asset base that can easily fund your goals, there is just something about having recurring income that makes life in retirement feel that much more secure. It’s a behavioral quirk, but you can use it to your advantage.

Consider this idea: If you’ve hit your RMD age, sign up for an automatic distribution from a retirement account to your checking account. If you retired early, you could accomplish the same thing by having a recurring transfer from a taxable investment account. It’s like receiving a periodic paycheck, nudging you to spend as you see fit.

Believe it or not, many retirees are uneasy during the distribution phase of financial life – the perfect income plan means nothing if you are like so many who struggle to spend with freedom. By working with a financial planner, you can better identify your money values, which then translates into more meaningful spending and improves life satisfaction post your working years.

4.      Always Be Mindful of Taxes

Ok, back to the cold hard numbers. As you can see, the recipe for a secure retirement is this constant give-and-take between the qualitative and quantitative factors. For a lot of former small business owners, there’s anxiety about tax planning. After all, you and your family should do all you can to keep what was earned.

We bring in tax-planning experts, including CPAs and attorneys, to draft legal documents to shelter assets and income from Uncle Sam – all to the letter and spirit of the law, of course. Before the suits are called in, though, you can do small things like develop a distribution plan that pulls from certain accounts before others, and allow tax-free accounts, such as Roth IRA, to continue to grow. Roth Conversions can also minimize tax liability over the long haul.

5.      Stay Healthy

Medical costs only grow as we age. Part of a solid retirement plan includes a careful analysis of healthcare policies and how various strategies work alongside Medicare. Bigger picture, simply exercising and getting out and about can keep the doctor at bay.

It’s not just about being physically fit, either. The loss of social connections, which naturally came with running a small business, might leave you feeling out of place or outright depressed. Please work to maintain relationships with old colleagues and friends and seek professional mental help if feelings of despair linger. Building your muscles and building connectedness in retirement are both crucial.

6.      Review Your Estate

Any solid financial plan must include periodic updates on how you want your estate distributed upon your death. It’s never the rosiest topic, but ensuring that your estate plan aligns with your retirement objectives and family needs is required work.

Consider legacy planning techniques to transfer wealth to future generations with an eye on tax minimization and asset protection from potential creditors. We can also craft methods to bypass probate and reduce estate tax liability depending on your situation.

7.      Get Help

Retirement planning for small business owners can quickly turn complex. Entrepreneurs who navigated volatile economic cycles to succeed on the bottom line often have significant assets that require expert care and long-term management. A CERTIFIED FINANCIAL PLANNER™ (CFP®) professional working as a fiduciary for you is likely a worthwhile investment. Our team at Clear Harbor is devoted to developing personalized financial strategies and innovative solutions for business owners transitioning to retirement.

The Bottom Line

Exiting your business marks the beginning of a new chapter in your life. A retirement that could be decades long requires proactive planning, and the transition is rarely a walk in the park. Financial security during your golden years helps promote meaning, purpose, and confidence that you and your family can embrace the years ahead. By putting to work some of the strategies outlined above, a personalized life plan helps you hit the ground running on day one of retirement.