Family-owned and operated businesses have unique opportunities and challenges in retirement planning. The Center for Family Business at the Peter Paul College of Business at UNH prioritizes finding answers to the questions like how to achieve successful retirement planning. Our program emphasizes that no matter where owners are in their own business life cycle, it’s important to plan ahead.
Families can break the process down into two basic steps: separate the company’s balance sheet from a personal balance sheet, then build a retirement and succession plan.
In our ongoing monthly meeting with members, we recently brought in an expert in the field of retirement planning and wealth management for safe and timely advice. Connecting experts to our members is what we do.
For retirement planning, family business owners should start with a basic accounting of everything: assets, debts, expenses, cash flow, etc. Make sure to factor in Medicare and social security and list every expense and income on a balance sheet that covers both the business financial picture and the family’s personal financial picture. Families must include health care and real estate and retirement planning as well as the long-term logistical plans the family has laid out. These are the compass points for any business owner’s pathway and they need to be in place before one can accurately plan for the future.
In a family-run business, the legacy plan needs to be clear and predictable. Families should create a timeline so everyone understands future steps and the roles each person will play in successfully executing a transition of control and ownership in the future. Clear communication early will avoid any possible battles over who is responsible during a transition.
Once the business plan is established, owners should turn the focus inward. A personal balance sheet should reflect clear and realistic retirement goals. List what’s owed, what’s owned and whether the paperwork reflects what it should in terms of how everything is officially titled. Pro tip: reviewing how ownership is titled is important so families can have confidence in a long-term plan with enough cash to affordably enjoy retirement years.
As for the specifics of setting aside retirement funds, the cliché holds true: diversify. Stocks, bonds, cash and business holdings are the right place to start. A financial planner can always be helpful with sorting the details.
This is a two-generation conversation. Retirees have to answer where future income will come from when there’s no longer a paycheck. Solutions here are either asset-based and cash-based. Again, a retirement planner can help, but in a family-owned business, these items need to be sorted in case some elements of the business operations are tied into these answers. It all has to be sorted before control shifts to the next generation of owners. Retirees must be honest with what future expenses look like: travel, activities, basic bills, etc. Again, don’t guess.
Obviously, there’s a lot of concern about the markets and how it will handle family investments. Our members have been told to always look at the market historically: of the last 40-plus years of stock market returns, 32 of them provided positive overall returns to investors. The odds are in the favor of those who invest long term.
This is just one example of our ongoing learning sessions for our Family Business program through our Center. We urge family-owned businesses to consider joining us as we take on topics ranging from this to succession planning to how to achieve family harmony outside the business. The sharing of ideas, best practices, stories and advice bring real and timely value to any legacy and retirement planning process for these small and not-so-small business entities. Check us out at CEO & Family Enterprise Center | Peter T. Paul College of Business and Economics (unh.edu)