Just recently, I spoke to yet another brick and mortar business owner who stated to me, when asked about his retirement plan, that he had none, and his business was his retirement plan. Being in the retirement planning business since 2008, I always feel a bit strange, if not irritated, whenever I hear this type of foolishness. How could anyone’s business be their retirement plan in this day and age when technological advancements can render a business model obsolete overnight?
A couple of years ago, I asked my former jeweler about his plan for retirement, and I heard him same the same thing, and I was astonished. Seeing as he had already lost one of his business locations during the recession, you would think he’d know better. Relying on your business as your only source of retirement income is a very outdated business strategy that should have faded away with the 90’s at the dawn of the internet boom. With the onset of the internet and the rise of the “Technology Era”, no brick and mortar business or business model should be mistaken for anyone’s retirement plan. That train of thought is outdated and has led to severe consequences for many who thought that once they got old, they’d just sale the business.
Speaking of outdated business models and concepts, when was the last time you visited a brick and mortar book store? How about seen someone delivering newspapers on a paper route? Been to a record store lately? How about a video store? Nope…me either!
So what should you be doing if you are a small business owner with grand old thoughts of keeping the business going for the next 30 years, selling it, and sailing off into the sunset with all of your cash? First, you should know that any earned income, including the proceeds from the sale of a business, will be taxed at the highest possible tax bracket which is currently 39%. Thus, 40 – 50% of the proceeds from the sale of your business may very well go to paying federal and state taxes. How will that affect your retirement plan? A wise business owner can avoid this tragedy. Let’s face it…your business, may at some point, become obsolete! So, you’d better make other plans for retirement.
Those plans should include an investment strategy wherein money is placed into investments (outside of the business) in a well-diversified portfolio. I have heard it all…from “100% of my money being placed in real estate, I’ll only invest in gold, my business, or just plain old I don’t have nothing at all”. The fact of the matter is, you had better put something away, and if you haven’t started, start now!
Treat yourself like an employee and put money away into a real retirement plan. During the good times, save all or most of your extra income. During the bad times, put a little something away as well. Please understand that your business is NOT your retirement plan! By the way, the last thing that I had my former jeweler make for me was a pair of Bison nickel cufflinks, and even he mentioned that I could have purchased a pair of similar cufflinks online from eBay!
A list of once popular businesses that anyone over 30 would know but are now gone.
1. Compaq Computers
2. Borders (bookstore)
3. Blockbuster (Video)
4. Hollywood (Video)
5. Research In Motion – Blackberry Phones
6. CompUSA
7. Tower Records
8. Circuit City
9. Linen’s N Things
By:Walter Hines
Business Editor
ReelUrbanNews.com
“I blog; therefore, I am!”
Twitter Account: @bisonbiz2012
Website: www.bisonbiz.com
Email: walter@bisonbiz.com
*Download a copy of “How to Fund a Tax Free Retirement with Guaranteed Returns” at http://www.bisonbiz.com/#!retirement-iul-vs-401k/cmwj
