Now is the time to think about your retirement goals
No matter what your age or the status of your business, it is not too early to think about retirement and estate planning. The sooner you think about retirement, the more time you will have to maximize all possible avenues in order to retire in the way that fulfills your hopes and dreams. Even if you thoroughly enjoy your work and plan to engage in it for the rest of your life, you should plan for retirement. You need to think about contingency plans should something happen to you or any of your key employees.
Outlining your plan
You should first look at the best-case scenario. What are your preferences? How many more years do you want to continue what you are doing? What kind of lifestyle do you expect upon retirement?
You also must give some thought to worst-case scenarios. What are the contingencies if you become disabled? What would you do if you lost any key employees? What would you do if someone offered to buy your business or property?
After you have considered all of the possibilities, you need to sit down with your financial advisors. You will probably want to involve both your banker and your CPA. They each have a different set of abilities that, when considered together, will best help you meet your goals.
There are many ways to set aside funds for retirement. Most of these will, in some way, have tax implications.
If you own the company, you may want to consider setting up some type of plan within your company that benefits both you and your employees. Retirement plans are a good way to entice, and keep, the best employees. After you have investigated your options and laid out a plan, you will need to meet with your attorney to draw up any needed legal documents.
Wealth is preserved by minimizing risk and diversifying activity. In order to do this, the owner must think beyond the day-to-day operations. Just as you have been successful by setting and attaining goals for growth, you need to do the same for maintenance and preservation. It requires the same type of commitment of time and resources. It is important to lay out all your plans and goals to your advisors and get their expert guidance. At this stage, it may even be necessary at this stage to take on another advisor, one specifically experienced in wealth preservation.
One of the most important pieces of information you can convey to your investment advisor is what is your most important unmet goal or objective outside of your business. They can then put together some plans to meet those goals or objectives for you to evaluate.
This advisor should be willing to expend whatever is necessary upfront to show you that they have listened to you, discovered your needs, and developed a solution that you can implement. If this advisor is separate from your banker, CPA and attorney, they should work closely with all of you to have a full understanding of your goals and needs.
While estate planning should be a part of your overall retirement plan, it does take some extra consideration. If you care about leaving any of your money to your family or a charity, rather than the IRS, you have to carefully lay out your plans. Besides planning for what you want to have happen upon your death, you need to plan for the potential need of extended care in case you become incapacitated.
Hopefully, you have been successful enough to have assets to pass along. The more you have, the more complicated it can become, and the higher the likelihood there will be challenges if your plans are not laid out clearly and legally.
If you have been married more than once it is even more important to clearly lay out your plans. States vary on how they treat estates and families from current and previous relationships.
Other areas to carefully discuss with your financial experts are the possible use of trusts and insurance to fund your estate or potential taxes. Generally, life insurance benefits become a part of the total estate and could be subject to estate taxes. This could be avoided with an irrevocable life insurance trust, or ILIT. These are especially important for people that have a lot of real estate and not much cash. Insurance in the trust could pay the tax without the heirs having to sell the real estate to pay the taxes.
Reviewing your plan
Once you set up your goals and plan, you need to review it regularly—at least annually. If adjustments need to be made, the sooner you make them, the better off you are going to be. Utilize the services of qualified advisors with whom you are comfortable. The more planning you do, the better chance you have of a bright future.
The author is a partner in Trusty & Associates, a communications and market research firm located in Council Bluffs, Iowa.