You're proud of the successful business you've built, but not everyone wants to keep hustling hard at age 85 like the estimable Ruth Bader Ginsberg. Many small business owners don't plan on fully retiring at 65, but they would like to put down the balance sheets eventually to spend more time with their grandchildren or other loved ones.
Assuming you've planned ahead by setting up retirement accounts and contributing to them regularly, segueing seamlessly from the working world to the snowbird lifestyle can make your golden years the best ones yet. Business owners do have additional responsibilities to put in order before hitting the golf course. Take the following five tips into consideration when planning your exit strategy.
1. Determine How to Pass on Ownership
Some business owners plan to sell their company for a profit, while others intend to create a family legacy by passing ownership to adult children or other family members. Those wishing to sell should consult an attorney to ensure the purchase contract contains all necessary terms and conditions. Create a solid succession plan that protects the financial interests of your family should the business go south under new ownership.
Those passing the business on to heirs should, likewise, seek legal counsel on how to transfer ownership. To prevent conflicts from causing a familial rift, be as transparent as possible when discussing the business' future with family and make sure they're both willing and comfortable taking over the day-to-day operations.
2. Talk to Your Financial Advisor
Many small business owners build the majority of their fortunes from profits. Before retiring, you should speak with a financial advisor about diversifying your portfolio. Medical advances mean many people live longer, and you don't want to exhaust your retirement kitty too soon.
Retirement investments should offer returns that offset inflation. By investing wisely, your money continues working for you long after you hang up your apron.
3. Put Business Finances in Order
Your finances serve as an X-ray for the overall health of your business. Sloppy accounting techniques and inaccurate tax filings create headaches for future owners and reduce the profit earned from the sale of the company.
Six to 12 months before rewarding yourself on your retirement with a shiny new Rolex, make sure your financial records are organized, and your books are updated. Resolve any outstanding tax matters completely, and hire legal assistance if necessary.
4. Choose a Downsizing Location Carefully
Small business owners who wish to still exercise some oversight over operations must consider proximity to the company location when downsizing. Those who sell the entirety of their interest should still consider multiple factors when choosing their retirement home.
Retirees must carefully consider the cost of living when selecting a place to spend their remaining years. As your savings need to last the rest of your lifetime, balancing the average cost of living with the availability of amenities like public transportation and proximity to family members directly impacts your overall quality of life.
5. Check With Social Security
Many small business owners plan to retire before age 67, but continuing to work in any capacity may impact your Social Security benefits. Those planning on retiring should contact their local Social Security Administration office to determine what, if any, benefits they may avail themselves of. While all retirees get their full benefits once they reach the legal age even if they still earn business income, claiming early SSA benefits can lead to additional liability come tax time.
Enjoying Your Golden Years to the Fullest
Gaining independence from everyday work obligations frees retirees to pursue interests beyond those activities required by the daily grind. By planning early and seeking qualified professional advice, small business owners can retire in style and comfort while looking back with pride upon their financial savvy and career achievements.
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