The 19 Sources of Retirement Income: Business Income
Welcome to the Wealth under Pressure Podcast, in which John Smallwood, a certified financial planner, identifies key areas of pressure on your wealth and strategizes with you to reduce it.
In this episode, John continues his series on the 19 Sources of Retirement Income, discussing the benefits of holding on to your small or medium-sized business in retirement.
John is the author of 5 Ways Your Wealth is Under Attack. He has lectured extensively on financial planning and has received the Five StarSM Wealth Manager Award 6 years in a row.
John’s strength lies in his ability and commitment to continually improve the level and quality of the financial planning process. His dedication to his clients’ growth involves an evolving strategy that strives to meet the demands, desires, and needs of his clients in a continually changing economic environment.
Don’t miss John’s key points:
- When deciding whether to sell your small or medium-sized business in retirement, ask yourself:
- Do I still enjoy aspects of the business like relationships with staff and the intellectual challenge?
- Do I have—or can I hire—key competent personnel who can oversee the day-to-day and allow me to take a smaller role, focusing on the aspects of the business that I enjoy most?
- Is there a compelling financial or personal reason to sell it?
- If you answered yes to the first two questions and no to the last, you may want to maintain your business. It can be hard to replace business income in retirement, and you will lose many tax benefits.
- Depending upon the business type, business income has wonderful tax benefits: depreciation, depletion, and—depending on the type of business—the qualified business income deduction (in Section 199A of the tax code), which allows 20% of the annual income to be tax-free.
- Business income—depending on your succession plan, your buy-sell agreement, and your role in maintaining that business—may be the best thing that you have in your plan.
- You can’t make a decision unless you know what your business is worth, what your strategy is, and how your current income will be replaced in your retirement plan should you sell.
At Smallwood Wealth, we can help you (1) build a retirement blueprint, and (2), put a number on what your business is worth. We have business evaluation calculators that can help with that. Then we ask, “What are the variables you can tweak to make the business more valuable? How do you make it more profitable so that you can take more money out? How do you maximize the qualified business income deduction?”
For more, listen here. Then visit us at smallwoodassociates.com and click the “let’s get started” button, connect with us on social media, or call us at (800) 797-1000. Set up a free, no-obligation 30-minute phone call with an advisor to discuss your plan.