Why Your Business Plan Shouldn’t be Your Retirement Plan


Considering how much time and resources you pour into your business, it’s natural to believe your investment in it will also roll into your future retirement. However, leaning solely on your business as a source for your retirement funds has big risks — even for businesses that have consistent and significant growth each year. Let us explain.

Blame it on the economy

Business owners should be cautious when valuing their business over time. There’s no guarantee your business is recession-proof and if your planned retirement coincides with a fall in the U.S. economy, your business’ value and income could suffer significantly. This may force you to take a hit when it comes to selling your business or push out your plans to retire.

It’s survival of the fittest

The market is constantly changing, with new demands and new technology — which encourages innovation and new competitors. Just look at all those NYC taxi drivers who spent $1 million on taxi medallions in 2013 only to have the value of those medallions quartered to under $200,000 by the introduction of ridesharing apps like Uber and Lyft.  However, new competition isn’t the only threat. Larger competitors that may have higher resilience could overwhelm the market and the demand for your business’s product or services. Evaluating the lifespan of small businesses in your industry may also help you manage your expectations.

Somethings are just out of your control

Many of the variables faced by small business owners are outside your control and can weaken your business’s position and growth. These can include consumer trends and behavior or an increase in overhead costs such as energy and material prices.  A good example is the sharp increase in the price of imported goods we are seeing as a result of current trade policy.

What’s a better way to save for retirement?

To protect your future self, your retirement plan should be crafted separately from your business. Diversifying your investments and assets is the best way to reduce your risks and open up avenues for growth. If possible, leverage qualified plans to defer taxable income while increasing benefits for your employees.  Discussing your retirement goals with an experienced financial advisor who can evaluate your individual and business assets to author a decisive plan of action for the years to come can further support your vision of retirement.

If you’d like to discuss your retirement plans further, a Tobias Financial advisor is ready to speak with you.

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