When Your Small Biz Is Your Nest Egg
Here’s how many small-business owners plan to fund their golden years: by selling the business they’ve built for a pile of cash.
For soon-to-retire entrepreneurs, however, a probable recession could put a damper on those plans. “The No. 1 question we’re getting asked right now is: ‘Is this a good time to sell?’” says Robert Koenig, president of Woodbridge Group, a New Haven, Conn., a mergers-and-acquisition firm that often helps baby-boomer clients bring their companies to market. “They are worried that it’s not a good time, that the economy is affecting buyers’ thinking.”
Indeed, a weak economy can dramatically affect your company’s bottom line and its ability to attract a buyer. That’s why financial-planning experts say it’s critical to also fund tax-favored retirement plans — such as 401(k), simplified employee pensions or SIMPLE-IRA plans — throughout your career in anticipation for the next stage of your life.
But for retirement-age business owners who haven’t adequately prepared, it’s not too late to bulk up your retirement savings and tailor your company or acquisition during an economic downturn. Here’s how.
Play Catch-Up. If you haven’t been socking money away, it’s time to consider a defined-benefit retirement plan — essentially your own pension plan. These plans work well for high-income people in their 50s who have less than they should in retirement savings and want to contribute more than defined-contribution plans (such as 401(k)s) allow.
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Photo by MSDesigns.
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