facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
Retired Military Finances 301: Why Retirement Planning Is Different for Business Owners Thumbnail

Retired Military Finances 301: Why Retirement Planning Is Different for Business Owners

Retirement Funding

So, you're a business owner. The good news that as a retired Senior Military Officer or NCO you have some guaranteed income for the rest of your life. That doesn't mean you're in the clear as running a business presents unique challenges and opportunities that can significantly impact retirement planning. Here, we’ll share some reasons why retirement planning differs for business owners and explore some key considerations they should consider.

Business Owners Are Both Plan Sponsor and Contributor

One of the primary distinctions for business owners is the dual role they often play as both business operators and retirement planners. Unlike employees who contribute to employer-sponsored retirement plans, business owners must establish and manage their own retirement accounts. This includes deciding on retirement account types, contribution amounts, and investment strategies.

Business Owners Often Have Variable Income Streams

Business income can be variable, which adds complexity to retirement planning. Unlike employees who receive a consistent paycheck, business owners' income can fluctuate based on business performance. This variability impacts the ability to predict future retirement savings and requires flexibility.

Retirement Planning for Business Owners May Include an Exit Strategy

For many business owners, their business represents a significant portion of their retirement nest egg. Determining the value of the business and planning for its eventual sale or transfer is a critical aspect of retirement planning. This process involves understanding market trends, conducting business valuations, and developing a strategic exit plan.

Business Owners Should Diversify Their Investments

While the business is often a significant asset, retirement planning for business owners should also focus on diversification. Solely relying on the business for retirement income can be risky, particularly if market conditions or industry changes affect business performance.

Diversifying retirement savings into other assets such as stocks, bonds, real estate, or alternative investments can provide additional security and stability. This diversified approach hedges against the risks of business ownership and market volatility.

Business Owners Have Different Tax Considerations

Taxes play a substantial role in retirement planning for business owners. Understanding the tax implications of various retirement accounts, contributions, and withdrawals is essential for optimizing retirement income.

Business owners have access to unique retirement account options, such as SEP-IRAs, Solo 401(k)s, and SIMPLE IRAs, each with its own tax advantages and contribution limits.1

Additionally, the sale of a business can have significant tax implications.2 Proper tax planning can help minimize tax liabilities and preserve more retirement funds. Working with a financial advisor who specializes in business owners' needs can provide valuable insights into tax-efficient retirement strategies.

Retirement planning for business owners requires careful planning and unique strategies that are different than those for employees. From the dual role of managing the business and retirement accounts to navigating variable income streams and tax implications, business owners face a distinct set of retirement planning challenges and opportunities.

Military Finances are Different

As mentioned at the beginning of this article as a retired Senior Military Officer or NCO, you have guaranteed income for the rest of your life (which just happens to be inflation adjusted...Ka Ching!). Most of your civilian counterparts only have Social Security to help fund their retirement. To be frank, the financial planning required for a civilian is different than that required for an Active or Retired Senior Military Officer or NCO. That's why we think you should work with an advisor that deals with those unique military issues each and every day. If you'd like to find out how we work with clients like you, use the button below to schedule a free initial consultation.

If you found this article useful, you might like the following blog posts:

Retired Military Finances 301: Business Owner? You Have a New Task on Your List


Retired Military Finances 301: A Guide to Beginning the Business Succession Process


Retired Military Finances 301: Business Formation




  1. https://www.investopedia.com/articles/personal-finance/120314/top-retirement-strategies-small-business-owners.asp
  2. https://www.irs.gov/businesses/small-businesses-self-employed/sale-of-a-business

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Disclaimer
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.