CIBC estimates that approximately $1.2 trillion in Canadian business assets alone will change hands by 2010 as more baby boomers anticipate retirement. Imagine what that means for American businesses!
Business owners not only have to worry about their own retirement planning, but will also need an exit
strategy and a long-term plan for their employees. The same study found that 60% of small business owners haven’t even begun to discuss their retirement plans yet.
Don’t leave yourself struggling to pay bills or your employees hanging high and dry. Develop a responsible plan for building business after you’ve retired and explore your options today.
Social security and pension plans should be the baseboard for your retirement planning, but you’ll have to think more creatively to continue making money once you’ve left your business.
Many owners, while simultaneously building business, choose real estate investment properties or further their stock and mutual fund investments.
In addition to expanding your business, you should be retirement planning and considering an exit or succession strategy. Recruiting the services of a financial planner can be an invaluable asset.
For many retirees, 31% of their business retirement plan will come from the sale of their business. An additional 28% will come from a registered government savings plan, such as an IRA or 401k, and 25% from stock market investments. The smallest income will be the 16% from social security or pension funds.
Should you offer employee retirement planning? While building business, it’s a good idea to share some of the company profits with hard-working employees. Generally a company with an employee retirement plan will have better productivity, stock purchases, employee retention and a more secure future.
For starters, you may want to consider a Simplified Employer Pension IRA. You will make contributions to a general fund, using up to 15% of employee income, in the employee’s name which they will receive when they retire or decide to dip into the fund.
You can decide what percentage of the company’s profits you’ll distribute among employees and you’ll enjoy easy administration, no additional IRS reporting, tax kickbacks and a better rapport with your employees.
One in five small businesses now offers an employee retirement plan, so don’t hesitate to look into a SEP-IRA or 401k plan when building business.
While it may seem like a daunting task to cover the retirement planning of yourself and your employees while building business, a simple trip to Fidelity Financial or a financial planner could get you on the right track.
By learning more about your investment options and developing an exit strategy, you can ensure that your golden years will truly be the best.