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South Burlington, VT

Value Creation Blog

In An Exit Plan Your Retirement Plan Is Key

Posted by Josh Patrick

retirement Many of the business owners we work with are not able to financially leave their business.  Often this is because they haven’t found a way to diversify their investments.

When I hear other financial advisors talk about business owner diversification I hear them speak about safety.  The safety that many advisors are talking about is the risk of having all your eggs in one basket.  (Your business)

This is a risk but the bigger risk I find is that not having a diversified investment portfolio doesn’t allow you the financial freedom you may want.  A retirement plan allows you to pre-fund your retirement with assets that have come from your business while your still running your business.

If your salary covers your living expenses and you have $70,000 in profits it’s easy.  If you pay yourself enough to live on and your company has some excess cash in profits there is a reasonable chance that you can put away $49,000 or more in your retirement plan.

Because your retirement contribution in a qualified plan is tax deductible, the cost for your contribution is actually less than $49,000.  In some cases it could be as much as $20,000 less.  This is because the government allows you to take a tax deduction for what goes into your plan.

Putting $49,000 away for twenty years or more can help with financial readiness.  John Leonetti from Pinnacle Equity Advisors has coined the term financial readiness for business owners leaving their business.  Having a large sum of money in your retirement plan can help with that financial readiness.

It’s possible to save $1,000,000 or more in your retirement plan by carving out some of your profits every year.  This retirement money can provide you with needed income when it comes time to leave your company.  In fact, many times the difference between a high quality retirement and one that’s just OK from a financial point of view is how you’ve used your retirement plan as a business exit planning tool.

Your business is not likely to get you to retirement by itself.  There are about 6,000,000 private businesses in the United States.  I have found very few that will grow large enough to provide their owners with several million dollars in proceeds when it becomes time for them to leave their business.

Why not use a sanctioned government program to fund your retirement?  Qualified retirement plans have been around for years and don’t seem to be on anybody’s list for elimination.  Learning all you can about plans that are available will provide options that could make your financial future a better one.

What are your thoughts about diversification?  Have you ever looked to see what your business will really provide you after you decide to leave?  The answer might be a scary one.

Josh Patrick

I have put together a case study that uses what I call the four boxes of financial independence.  This case study will give you a method that is easy to use to see if you are on the right track to reach financial independence after you sell your business.  To get this case study, click on the button below.



Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.


This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: retirement planning, for business owners, exit planning, business exit planning

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