Articles Tagged ‘Retirement’

Exit Planning: First Things First, Prioritize Your Objectives

Wednesday, May 18th, 2011

Presented by T. Ray Phillips

“You’ve got to be very careful if you don’t know where you’re going, because you might not get there.” — Yogi Berra

It is not always easy to interpret Yogi. In this case, perhaps he is advising you to figure out just where you are headed in your business. As you near the time when you will leave behind the daily worries and stresses of business ownership, have you defined your successful exit? Do you know where “there” is, much less how to get there? Unless you set and prioritize your exit goals or objectives, you may have too many, or they might conflict, but in either case you may not make much headway.

The clearest example of a failure to set objectives may be Bill Wilson (not his real name), a business owner who recently told us that he wanted:

To leave his business within three years, but he was ready to leave today;
Financial security, defined as a seamless continuation of his current lifestyle; and
To transfer the business to his key employees.

A quick review of Bill’s personal financial statement, however, revealed that most of the income required to maintain his lifestyle would have to come from the business. Unfortunately, his business wasn’t large enough to attract a cash buyer. And, since Bill had done no Exit Planning, his employees had no funds with which to purchase his ownership interest. A long term installment note seemed to be the only answer — a risk Bill was unwilling to take.

Contrast this unpalatable solution with Bill’s objectives — objectives which could have been achieved had he taken the time (well before he wanted to leave the business) to establish and to prioritize his Exit Objectives.

If, for example, an owner’s need for financial security prevails, selling a business to a third party for cash may be the best and quickest exit path.

If, however, attracting a qualified third party is unlikely, an owner may need more time to devise and to implement a transfer to an insider (child or employee) that provides the owner adequate cash.

On the other hand, if an owner’s desire to transfer the business to a specific person or group trumps his or her need for financial security, and his/her deadline for departure draws near, financial security in the form of “up-front” cash must take a backseat.

As you can see, owners must consider—simultaneously—the three primary exit goals (listed below). Ask yourself which is your most important exit objective and rank your answers from 1 (most important) to 3 (least important).
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NYHART STUDY REVEALS AVERAGE 401(K) PARTICIPANT CAN’T AFFORD TO RETIRE UNTIL AGE OF 73

Friday, December 3rd, 2010

STUDY REVEALS AVERAGE 401(K) PARTICIPANT CAN’T AFFORD TO RETIRE UNTIL AGE OF 73

December 1, 2010 (Indianapolis) – Nyhart (www.nyhart.com), one of the
nation’s largest independent actuarial and employee benefits consulting
firms, released their _Fall 2010 401(k) Retirement Readiness Study_ today as
part of the firm’s ongoing look at the effectiveness of the traditional
401(k) retirement benefit.

The 6-month study reviewed nearly 10,000 retirement accounts from employees
at 110 public and private companies. The study evaluated how contributions
to their 401(k), the primary retirement tool for most of these employees,
would affect the age at which they could retire.

Key results in Fall 2010 401(k) Retirement Readiness Study include:
* 81% of employees 18 or older will not be able to afford to retire by the
age of 65
* The leading cause impacting employees’ ability to retire on time is
their failure to contribute enough of their income towards retirement
* Employees above the age of 55 will need to contribute more than 45% of
pay through the remainder of their career to retire by age 65. Employees
age 45-55 must contribute 19% of pay to retire by 65.
* The average participant, relying on their 401(k) as a primary retirement
vehicle, will not be able to retire until the age of 73.
* Most employees age 60-64 will likely need to work until the age of 75 to
be able to afford to retire at their current levels of contribution to
their 401(k).
* 30% of employees age 24-and-under do not participate in a 401(k)
benefit.
* 7 in 10 employees age 24-and-under are not expected to retire by age
65.
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