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What retirement-planning options will keep my family-owned business secure but still provide assets for a comfortable retirement?

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For many business owners, retirement planning is tied to succession planning and it can be a challenge to determine what takes priority: retirement security or a successful succession strategy. Here are some considerations:

Start with a comprehensive financial plan. Fundamentally, business owners should approach retirement planning as others would, starting with a comprehensive financial plan. In executing the plan, however, owners have access to a wider range of strategies and solutions.

At Bank of the West, we begin with a dynamic discovery process, guiding the business owner to define financial and nonfinancial goals while identifying obstacles. Next, we create a baseline financial picture that includes a detailed net worth and cash flow statement, in addition to an in-depth analysis of investment asset allocation and location. Then, we develop a strategy that meets the owner’s goals and time frame. We recommend planning for retirement as early as possible and, for business succession, at least five to seven years prior to the liquidity event.

Think about how to meet your goals in a way that considers both family and employees. When developing retirement strategies, many business owners want to consider the needs of their employees at a level almost equal to the needs of their family. Strategies may include establishing defined benefit plans and/or nonqualified deferred compensation plans, which can defer a larger share of earnings to the owner while providing additional retirement vehicles for key employees. Additionally, certain corporate entities may allow for the purchase of long-term care coverage, a key component of tax advantaged retirement planning, for both the owner and employees.

Leverage your business assets to create cash flow. Often, business assets can be structured to create an income stream to the owners or to other designated parties. A business property, such as a commercial building, may be held in a separate limited liability company (LLC) and produce rental income in retirement, if it is not included as part of the sale.


-Submitted By Ronny Inniger, vice president and market leader at Bank of the West Wealth Management.

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