Small Business Owners Preparing for Retirement

Situation

Mike and Rachel are in their late 50s when they begin thinking about selling their family business. They have always been savers but never had a plan for how to shift into retirement. They are second-generation small business owners who have dedicated over four decades to their business while raising a family. As they get closer to retirement, it becomes evident that neither of their children nor any key employees have any interest in owning the business. They need an external succession plan to allow them to transition into their next stage of life.

Strategy

After many thoughtful conversations about what retirement looks like for Mike and Rachel, we update their comprehensive plan to determine how much the business needs to be sold for to achieve their retirement goals. This is achieved with guidance from an independent business appraisal and a second opinion from a CPA experienced in business valuations. Finally, an ideal buyer is located through a business broker who is willing to purchase the family business and real estate based on the terms Mike and Rachel are looking for.

We coordinate discussions with their CPA to determine the tax implications of the sale and discuss ways to mitigate the tax consequences. We also discuss the sale with their estate planning attorney to determine if there are any potential estate tax issues.

Their investment allocation is updated to generate additional income and reduce risk, since they will no longer have earned income. We also discuss cash flow needs as they plan to sell their home, build a new one, and move closer to their adult children.

Outcome

After the business sale, Mike and Rachel relocate to an active, beachside adult community to enjoy retirement. There was never any doubt about being able to retire, but they did not know how to plan for it on their own. After thoughtful planning, guidance, and advice, they can confidently enter this next phase in their lives, where they can enjoy what they worked so hard to achieve.

This common scenario is hypothetical and provided for informational and illustrative purposes only. It does not represent an actual client of Spraker West Wealth Management, nor is it based on the experiences of any current or past client. The scenarios, strategies, and outcomes described are not intended to be projections of future performance or an indication of actual results. No portion of this content should be construed as a guarantee or assurance that any client or prospective client will experience the same or similar results or level of satisfaction if Spraker West Wealth Management is engaged to provide investment advisory services. All investment situations are unique, and results will vary based on individual circumstances, goals, risk tolerance, market conditions, and the client’s own actions, effort, and discipline. Past performance is not indicative of future results.