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As a business owner nears retirement, he or she must make numerous difficult decisions concerning their own and their company’s future. While some people want to sell their company to support their retirement, others simply wish to step away from day-to-day operations. Owners who wish to stay involved in their business after they retire should not only set aside monies for personal use, but also decide how much of a financial role they want to play in keeping operations running. To assist small-business owners, 13 members of Forbes Finance Council outline strategies to help them decide on, create, and maintain post-retirement financial funds for their company’s activities.
1. Make plans several years ahead of time.
Business owners require a reliable advisor who will push them to think beyond the next quarter, if not the next year. Creating a vision for what you want your retirement to look like a few years before making the shift will allow you to train key workers to take over your tasks and give you time to build the cash in the firm you’ll need to make the change. – IronBridge Wealth Counsel’s Cole Stoneman
2. Take into account permanent life insurance.
Consider using permanent life insurance as a mechanism to leverage firm cash reserves to fund future executive perks with the help of your financial advisor. It’s an excellent method to keep capital on your balance sheet, grow strategically, and control risk. – Redbird Advisors’ Drew Gurley
3. Set away a specific portion of revenues.
Set away a certain amount of profits each month for the company’s long-term needs and forget about it. Create precise instructions for the usage of these funds (akin to an investing policy statement), and then stick to them. GlowTouch LLC’s Jarred Cook
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4. Diversify your investments by automating them.
Invest in things outside of your business by automating a monthly dollar amount. You must diversify your risk, but it does not have to be through high-risk assets such as index funds or mutual funds. It will be ensured by automating it. – National Business Capital’s Joe Camberato
Forbes Finance Council is an invitation-only group of successful accounting, financial planning, and wealth management executives. Do I meet the requirements?
5. Think about several ways to save.
There’s always a smart option here, like selling a minority stake. For both my business and personal money, I believe that maintaining a range of savings accounts is essential. Engineered Tax Services Inc.’s Julio Gonzalez
6. Take advantage of tax-advantaged investments.
Taxes are the single highest expense faced by business owners. As a result, using a Roth IRA plus a Roth 401(k) to construct an emergency retirement fund is a terrific idea (k). You can go on to a nonqualified account once you’ve maxed out your Roth IRA and Roth 401(k). Then, depending on your income, move into tax-deferred investments, and lastly, a taxable account. Heritage Investors’ Justin Goodbread
7. Don’t try to’save’ your company once you retire.
The one thing a business owner who does not plan to sell their company when they retire should avoid is attempting to “rescue” it. If the business is mismanaged or unsuccessful while they are retired, the owners who have “stepped back” will frequently try to “rescue” it, which usually leads in the loss of both the business and their personal retirement savings. Tiltify’s Joseph Orseno
8. Make an investment in your succession strategy.
Human capital is the best investment you can make. Make sure you have a clear succession plan in place and that you take the time to build depth in your management team. This allows the founder to take a step back from day-to-day operations while yet staying an active and involved stakeholder. Switching from a salary to dividends will also help with long-term sustainability. – First River Capital’s Jason Hamilton
9. Decide how long you’d like to be involved.
In this circumstance, a business owner’s strategies should be based on how long they expect to stay. Personal savings accounts are frequently predicated on six months to a year’s worth of living expenses. After determining how long they plan to stay, the owner can prioritize the most significant running expenses to cover and calculate how much months or years of coverage they require. That would satisfy their need for a business reserve. – Strait & Sound Wealth Management LLC’s Todd Sixt
10. Maintain a cash reserve of at least three months’ worth of operational expenditures.
Make it a point to keep three to six months’ worth of operational expenses in cash on hand. You don’t have to store it in a bank account; instead, you can invest it in short-term securities that you can access without penalty. Over time, build this fund by requiring that a modest amount of your incoming sales be deposited into a specified account. If you don’t stick to a rigorous budget, you won’t be able to meet your goal. – Eventus Advisory Group, LLC’s Aaron Spool
11. Reserve funds for executive hires.
Have at least six months’ worth of business and personal costs on hand at all times. I utilize life insurance and gold to beat inflation and hold real assets rather than paper money. This provides a safety net. Set aside funds to hire the correct executive team so that you may hand over your role as the owner-operator with confidence that the job will not come back to you in the future. – Wealth DynamX’s Jerry Fetta
12. Put a portion of your profits into a low-risk investment vehicle.
Long-term planning is required for retirement or simply stepping away from active management of a corporation. I propose saving between 5% and 15% of your company’s profits in a low-risk bond or money market fund for at least a few years so you’ll have a substantial nest egg to continue business operations during your impending transition time. Regal Assets’ Tyler Gallagher
13. Consult your advisor about future financial alternatives.
Make an appointment with your financial advisor to explore profit sharing, ghost shares, and other options for putting money aside for the business owner in the future. This is also beneficial from a tax standpoint right now. GCubed, Inc.’s Kelly Shores/nRead More

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