Hey, what's your number?

Many business owner clients operate businesses that often represent the majority of their wealth generating capacity.  Most people want to retire, or at least get to “work optional” someday, so these owners are fairly reliant on the business itself to provide the resources necessary to enjoy what is hopefully a long, healthy and fulfilling post-work phase of life.  A key question is “How much do I need?”  The answer depends on many variables.

Non business owners earn a salary and may have an employer sponsored 401K or other retirement program that they plan on relying on for their retirement.  For the business owner, often the company itself represents a majority of their personal Net Worth.  Regardless of an individuals various sources of income or retirement savings, certain aspects of the planning process will be similar. 

There are simplified calculators online that you can use to determine the present value of what you will need at retirement, but of course, there are a number of variables to be considered that may require some discussion with you family and a good financial planner. 

There are several steps in this process:

1. Estimate Retirement Expenses:  A good rule of thumb is to use 80% of your pre-retirement spending, but it is just a general rule.  It is less than pre-retirement spending because it is assumed you will have the mortgage paid off, the kids are out of college and moved out, and you are no longer putting money away towards retirement saving. 
2. Review known fixed retirement income; pension plans, fixed investment income, etc, and determine any shortfall between anticipated income and expenses after retirement. 
3. Look at current holdings; consider tax implications of utilizing each to fund your retirement.  If they include a closely held business, you will need to consider market value of the firm, and how to maximize company value upon exit. 
4. Consider anticipated rate of inflation, investment return and risk.  These will all impact what you have left at retirement, and if it will last. 
5. Review and update the plan at regular intervals, but at least annually, to consider any expected or unexpected life changes

If you are not at your number yet, there are several strategies you can take to become better prepared and improve your odds that you won’t outlive your wealth:

• Work longer – it may sound simple, but adding just another year or two has a significant impact.  You can also 
• consider shifting to part time for a period at a reduced salary but still have additional free time to pursue other goals.


• Increase retirement savings – take advantage of tax deferred opportunities to save (i.e. 401K, IRA accounts, Profit Sharing, etc)
• Increase the value of your business – clean up the financials, look at ways to improve overall profitability, hire to improve the strength of your management team, and of course GROW the top line.