How much of your personal wealth is tied up in your business?
Many business owners, who have worked hard and invested in their businesses for continued growth, face the possibility that the sale of their business may not generate a large enough nest egg for a secure, comfortable retirement.
It's important for business owners to develop a comprehensive plan that integrates business and personal retirement goals well in advance of retirement.
Laying the groundwork
Here are some key issues to consider:
- Do you plan to retire wholly, or in part, on the proceeds from the sale of your business? If so, who are the potential buyers and how can you maximize the value of the business?
- Will you get the price you are expecting? If not, will you have enough assets outside the business to meet your own, and your spouse's, retirement goals?
- Do you expect to receive income from the business after you retire? If so, what steps do you need to take to ensure that you'll receive this income? Could you count on that income if the business ran into financial difficulties?
Discuss these issues with your professional tax, legal, and financial advisors and develop a business succession plan.
Your succession plan might include a buy-sell agreement once you've identified an appropriate successor.
Diversify your retirement assets
Diversification is as important for business owners as it is for other investors. To make your retirement more secure, spread the risk by accumulating retirement assets outside your business.
Establish and maintain a regular investment program to build up your Registered Retirement Savings Plan (RRSP) and other retirement assets. In good times, put away as much of your excess cash flow as you can afford.
Plan with your spouse
Ensure that your spouse builds retirement assets too. Take advantage of income-splitting opportunities - through your business and pension income, after you retire - so that you and your spouse can equalize your income. This will help reduce your overall family tax bill.
Get professional advice to help you determine the amount of retirement capital you should accumulate outside the business.
This article is brought to you by Synergy Credit Union in partnership with Credential Asset Management Inc. We're here to help. We`ve got the plans, tools and expert advice so you can end up with more money now - and for years to come.