Balance Your Business and Retirement Goals with a Holistic Approach to Transition


By Brett Smith, Northwestern Mutual

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

When the deal goes through, the biggest financial event of your life will happen in that one meeting. But will you be able to make your dream of a fulfilling and financially secure future come true when it does? You’ll either have all of the money from the sale (if your transaction is all cash), a good chunk of it with more to come (hopefully), or a down payment on the value of the business with the promise of ‘a flow of upcoming payments over time (typically the case in a sale to family members or selected employees).

Why wealth needs to be managed

If you are like many business owners, you are probably in one of two camps: (1) you will want to prepare yourself in advance, learning as much as possible about how to manage the money you will receive; or (2) you will fix the problem when the money actually arrives. Either way, the choices you make about your company’s product will have a profound impact on your retirement life. This is why the watchword is “take your time” before moving forward.

Your business can be your most important asset and the foundation of the money you will need in retirement. These taxable assets, along with whatever else you’ve put aside in your qualifying retirement plan and / or individual retirement account (s), will need to generate enough income to last 20 to 40 years after you stop working. . How will you ensure that your money goes all the way?

A comprehensive transition plan can also provide a timeline and strategies that can help you reduce the tax payable on the transfer of assets when your business is sold. This can help you ensure that your income needs are met in the future by taking advantage of opportunities such as setting up a pension plan or other type of retirement arrangement before selling. the business – a measure that can help reduce the cost of the business. taxes and personal tax deferral. It can also highlight opportunities to prepay future expenses, potentially reducing the amount of after-tax income you might need in retirement. Examples include paid-up life insurance and a special trust to pay for uninsured medical expenses incurred after retirement.

Take stock of your financial situation

Consider working with a business transition expert who has the resources to address more than the investment management aspect of your wealth. Retirement income distribution planning, estate planning, family gifts and bequests, charitable planning, and medical and long-term care planning are all areas that should be incorporated into your overall plan. Together, they can pay big dividends in financial security for you and your family for years to come.

A business transition plan should be holistic in scope, helping you answer critical planning questions, such as:

    • • What do you want to achieve with the proceeds of the sale?
    • • How much will you spend each year in retirement?
    • • What is the best way to invest the money?
    • • Are there any gaps in your insurance coverage or estate plan?

Brett Smith is a Wealth Management Advisor at Northwestern Mutual. To contact Brett Smith, please call 864-679-3848, e-mail; or visit

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