If you've been dedicated to running a thriving small business for years, retirement may not often cross your mind. But eventually, you may want to retire from the daily grind.
Stepping back from your small business comes with different considerations than if you were retiring from a nine-to-five job. You'll need to determine what will happen to your business, when to withdraw income from retirement accounts and more. As you approach your golden years, consider these retirement tips for small business owners.
1. Set a Retirement Date
Thinking about the logistics of retiring from small business ownership can feel overwhelming. It can help to start by identifying a target retirement date, whether it's one year or 10 years into the future. Once you have a timeframe, you can start mapping out an exit strategy.
2. Identify Your Goal for Your Business
In some situations, it makes sense to pass down the family business to an interested child or another relative. In other cases, you may prefer to sell the business to a business partner or an outside party. Or perhaps you intend to close your business altogether.
Whether you're planning to transfer ownership or close up shop, there are many factors that go into the decision. Once you decide on a direction for succession planning, a sale or closure, start researching the steps required to see your plan through. Then, make a plan for how you'll accomplish these steps.
3. Work With a Financial Advisor
No matter what you plan to do with your business in retirement, a trusted financial advisor will be an important part of your team. A professional can provide financial retirement tips and ensure you're making sound decisions when it comes to everything from withdrawing from retirement accounts to evaluating your business ahead of a sale.
4. Tread Carefully With Retirement Accounts
Before you start to withdraw from retirement accounts, make sure you understand the rules for each account. There are minimum ages and other regulations for withdrawing from an individual retirement account (IRA) and other small-business retirement plans. If you withdraw from a retirement account too early, you could face expensive penalties and fees.
Your withdrawals will also be taxed at different rates. Work with a trusted advisor to help you craft a retirement income strategy that fits your individual needs.
5. Align With Your Values and Goals
Stepping away from your small business can be a big adjustment. When you're no longer focused on your business, how do you hope to spend your days? Will you stay in your current town or move to a new community? How will you stay engaged socially? How will you stay physically active?
Start thinking early about the lifestyle you want in retirement. Identifying your values and priorities early can help you avoid the fish-out-of-water feeling that some retirees experience at the beginning of retirement.
While retiring as a small business owner might seem complicated, taking it one step at a time can help you get through the transition so you can enjoy your retirement to the fullest.