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From Zero Savings to a Million-Dollar Exit
For many business owners, retirement savings don’t show up neatly in a 401(k) or IRA. They’re tied up in the business itself. Today’s listener question comes from a couple facing a sudden transition from “almost nothing saved” to managing a large lump sum late in the game. And they’re wondering if it’s enough.
Important Links: Website: http://www.yourplanningpros.com
Call: 844-707-7381
----more----
Transcript:
Speaker 1 00:00
For many business owners, retirement savings doesn't show up neatly in a 401, K or an IRA. It's tied up in the business itself. Well, this week, we're going to tackle a question from a listener dealing with the possibility of selling a business and what that might look like for their retirement. Look up in the sky. It's a bird,
Nick 00:22
it's a plane. No, it's the tax man. He may not be a superhero, but Tony Morrow has saved many retirement plans with his extreme knowledge of tax planning strategies. It's time for plan with the tax man.
Speaker 1 00:36
Hey, everybody. Welcome into the podcast. This is plan with the tax man, with Tony Morrow from tax, dr, Inc, find them online at your planning pros.com that's your planning pros.com where you can drop a line into the team and get yourself some time onto the calendar, and, you know, ask your questions, get some things answered. And we're going to take a listener question here this week on the program Tony, about selling a business. And I know you've as a business owner, you've also got a lot of business clients, and so a lot of people do find themselves in this position in America, a lot of small business owners. So we're going to tackle this here a second. But first, how you doing? I've been doing real well. You know, I like this topic because it's near and dear to my heart, and we have a lot of clients that I've seen experienced this exact thing we're going to talk about. So I'm excited to talk about that. And Spring is almost on us, so things are good, good. Well, yeah, let's dive in. Let's because there's quite a few additional pieces that is kind of a lot of lot to unpack here for if we want to dive in. And we'll try to keep this within our normal timeframe here, but see if we can help some folks out, if they might be in a similar situation. So here's the setup. The listener says, Look, I'm 60 years old. My husband's 58 we're definitely behind when it comes to retirement savings, because we have basically nothing saved, but we put it all into the business, and we're going to be selling our business soon for just under a million bucks. I'm very nervous about dealing with this large sum of money, since we don't have any investing experience. Wondering where should we start, and Will this be enough to retire? On any pointers you can help would be great. So I guess we can start with a couple of pieces of this Tony. So when you're, when you're selling a, you know, a business, and you've not saved anything, I mean, it is very it's awesome that the business is, first of all, I guess, sellable, enough that you're, they're selling it and making this money, right, right? That's the first step. I think for a lot of business owners, it's like realizing, hey, is this valuable? Is it sellable? You know, is there value there? And then, if you do sell it, now, what do you do? So what's some things to think about here?
Tony Mauro 02:27
Well, I think the first thing to think about is, and we see this a lot, is, I'll tell you, what they all say is, when we start talking about retirement and whatnot, they all that's what they say is, look, I'm not saying for retirement. My retirement my retirement is gonna be my business, and I'm putting all my money into the business. And so when we that's how the conversation starts. And then in this case, you know, I'd love to know more about it, but I'm gonna make an assumption here that they are gonna be at a million. I don't know what just under a million means. Yeah, let's, let's round it off for easy. Yeah. We'll just, yeah, we'll round it off. But what a lot of people don't realize is, if it's a service business like mine, or they don't owe anything on it, you sell a business for a million and you have no basis, which is kind of like, you know what you paid for your stock, then all of that potential money could be taxable, and if you're getting or giving up, say, 20% of it to the feds, another three or four to the state, you could end up with maybe 750,000 total after taxes. And then you also, you know, you got to factor in selling costs and things like that. So I'm just going to use 750,000 so it's not the million you think, because you're going to owe some taxes. Now, there's a lot that goes into that, because that capital gains, Tony, that's capital gains, yes, capital gains, taxes, and so you know, at first glance, you're 60 years old, and you've got 750,000 net to to, let's say, you know, save for retirement. Are you going to retire now or not? Or because I don't to me on the surface this probably, I don't know if it's enough or not. Depends a lot on their lifestyle and what they want out of life. Well, I don't know, yeah, what enough means?
Speaker 1 04:10
Let's break that down for a second. Okay, so based on your question, there is a million enough, or even 750,000 Well, first of all, the ages were 60 and 58 so you can't even access social security yet for either person, and you certainly can't access medical. So those are two pieces that certainly have to pop up, and if you've done no saving at all, then you're basically rocking this 750 grand for at minimum two years before the first person can turn it on for Social Security, Tony and and five for medical right? So that could be a huge problem. You know, in eating away that 750 may not last for someone's lifetime of 20 years more, I definitely don't think it'll last person's lifetime for sure, because if you know it just isn't going to work again, unless you're going to what you. Retirement to you is, you know, 3040, $50,000 a year total. But let's say, like you were saying, You got to go two or three years with spending, let's say 50,000 including, you know, paying for your for your medical and all of that. Well. Now you're down to, you know, 600,000
Tony Mauro 05:18
and you know, you're, yeah, or less. And you know that's not gonna last you 20 years. You know it just won't even at 50,000 a year. Even if you're earning, say, four to 6% on it, it's it's definitely not gonna be enough. I think it's good. You might know that now, yeah, and hopefully, if maybe the sale is not final, right now you're just thinking, maybe you keep it for a while and build it up and or save and then sell it later. That's a possibility. But I think let's say they're going to sell it now anyway. I think what you definitely need to do is get all these numbers with your advisor and start thinking about, you know, spending. I think you should think about, well, what are we going to do for the next 10 or 15 years? Because we really can't, other than this, we don't have any more income coming in. How are we going to save more?
Speaker 1 06:11
Because, yeah, you've got to get a plan together. I mean, you just mentioned, like, if you're making 4% off of the 750 that'd be the first question for someone like this, who doesn't know even where to start. Where do they park it? To get seven, you know, to get 4% right? So you want to get with an advisor. Are you looking at maybe some in an annuity? Are you putting some in the market, you know? Because you need to be a bit more aggressive, because you don't have any other money saved. I mean, there's a, this is where a financial strategy really comes in handy.
Tony Mauro 06:37
I think so. And I hit on a good point I was going to mention, is, I'm not a huge proponent of annuities, but they have their place, and this might be one of them, if, you know, you talk with your advisor and you figure out, I need an income I can't
Speaker 1 06:51
outlive, right? That's what I was thinking. Was the guaranteed income putting, you know, I don't know, you know, 200,000 or something of that into something that generates income. Yeah, it
Tony Mauro 07:00
generates income, and, you know, you can't outlive it, because I think that's the biggest fear with this couple, or biggest threat, I should say that they'll face is outliving this income. And if you've got nothing else coming in, eventually it's just gonna be down to Social Security, which is a meager existence, right?
Speaker 1 07:18
Yeah, so and that. So the whole question of what's Enough? Enough? Well, that's lifestyle. And, you know, all those pieces go into it. So, Tony, if you were, if you if this person came into your office and said, help us out, right? So you would start with, you start putting, kind of the, you know, the strategy together. Start putting an income piece and expenses right. Is, do they is, do they have a home? Is it paid for? That? That changes things, right? Changes things so there's a lot of data that would then go into hopefully helping somebody like this kind of see in black and white, are, where are we? Are you behind? Do you have a shortfall? And how much
Tony Mauro 07:52
exactly a client like this? This is why I love this topic. This is a very, I want to say, complex, but a very in depth conversation you need to have with somebody, with your advisor, because you have to lay all this out, and then you as the client got to be able to picture this. This is what it's going to look like. I've seen it before. And are you okay with that, or do you need to make us, you know, maybe make a change. But I think if you're going to go through it, that you really got to, you know, buckle it down. And, you know, figure this stuff out, the income needs, the expectations on longevity, all that kind of stuff. And so you are not going to get there. And because I've seen this happen too, where they didn't plan. And boy, are they really, I don't want to say upset, I guess the right word is disappointed that they worked all those years, sold the business. Of course, they didn't save anything, and they didn't plan, right? And then they're they're too old, they can't go back and
Speaker 1 08:50
go to work. Yeah, yeah. Well, so it's a temptation for folks like this could be as well, not everybody, but you haven't saved. Well, again, to this person's you know, question, you now have this big chunk of money, and we'll just call it the 750,000 the temptation could be, well, we're behind. Maybe we should go ahead and put a we should get aggressive with a bunch of it and swing for the fences right to make more money to get ready for retirement. So that could be a dangerous place to be, especially if you're not real savvy in what you want to do. Hopefully you don't take, you know, half a million dollars and go dump it into the market, you know, in in an aggressive, you know, portfolio,
Tony Mauro 09:27
yeah, I definitely think you need to start talking with your advisor and discuss the risks of that and diversification. And, you know, why that kind of strategy, you know, that's, that's risky. I mean, it's easy to see to say, you know, hey, these last few years in the market, especially saying, well, we dump 500,000 of this into the market, we get 20% back. That'd be great, yeah, and it would double itself, say, in even if we got 7% double itself in roughly about seven, seven and a half years. Okay, now we're. At a million. But what if that doesn't happen, and we go through a prolonged period of of downturn, even in just a few years, going to be devastating? And, you know, it's just, it would be a bad situation to go into that, if you're going to go into something like that, you better, better
Speaker 1 10:16
know all the Yeah, and that's kind of why I was asking, you know, that question earlier. You know, for somebody like this who's not real savvy, first of all, find an advisor, right? So I guess the first two things would be, take a step back, breathe like, let's Okay, let's, let's assume that deals going through, you're getting this money, you pay the taxes, whatever the case is, you know, don't rush to make an immediate decision, but certainly, take a little time. Do some, you know, do some vetting, and find a financial professional that you can talk to, go talk to a couple, right? Have those interviews and find out the right person for you, and then start discussing the strategy sessions of of what you know, what do I need to know, you know, and what would my Social Security look like when we do get there, like? Because that's going to factor into the strategy, right? So we don't know if they were paying them, if they had this business for 30 years, were they paying into Social Security properly? Is it going to be low numbers, mid numbers, high numbers, like all of those things, are going to factor in Tony to the overall next 25 year retirement strategy? Yeah.
Tony Mauro 11:13
I mean, all that's going to factor in. And I would say, On a different note, I was thinking about it when you were saying that is if we have younger business owners on this, the one thing I would say, and this little conversation frames it is the one thing our government does, I think, extremely well. I hate to even say that, but I'm gonna say it is, they have so many things for us, business owners to save for our retirement. I mean, from cash balance plans all the way down to Roth IRA 401, KS, everything in between. So if you're younger, try not to get to this point. I mean, in other words, you know, start saving through retirement.
Speaker 1 11:53
We talked about even a set, right, a simple anything, yeah, because
Tony Mauro 11:57
you could stash so much money in it and not have this. Then when you sell the business, then it's this million dollars less, less taxes, 750 is just an add on, and not your overall plan. But yeah, so, I mean, I it's not just for the for the people just getting ready to sell. I think it's younger people can have, have get some benefit out of this conversation.
Speaker 1 12:18
Tony, I tell me, if I'm wrong here, you know? I mean, I'm just the host, but, I mean, I've been talking about this stuff with advisors for 10 years. I feel like, you know, the first place that someone like this has to start, obviously, is, like we said, we'd have to, you have to find an advisor that you're comfortable talking to, that you get a good feeling about. And then you got to start asking, this is where the proper diversification is really going to come into play. How much should we put in the market? How much should we be a little bit aggressive with? How much should we have in safety and protection? How much should we set aside on an emergency fund? What you know, what's the House Situation look like, and then obviously dealing with the medical gap that's going to be coming up as well. Those, to me, those are all like the four or five main pillar pieces that I mean, honestly, that's the same for anybody, whether you worked for a company your whole life, or you worked for yourself in your own business, these are the standard pillars of retirement strategies.
Tony Mauro 13:08
That's it, I mean. And it would have to be the conversation with this couple, for sure, but anybody else, I mean, it's pretty much the same conversation we have, like you're saying, with all of our clients, because at the end of the day, that's what really matters. And I think if they're not looking at that and at least getting a big picture idea in which, I think is where the advisor can become valuable, is to kind of keep them grounded and on task. Yeah, there you go. You know, that's worth the fees that you pay, in my opinion. But certainly,
Speaker 1 13:38
yeah, that 58 and 60 they, you know, getting an advisor now and starting to help, you know, helping them work with this large sum of, sum of money. You know, there's a lot of those, lots of little moving parts and things they can help them with over time. To your point, I kind of getting started now, making tweaks along the way. You know, that's, that's a great point, right? So, yeah,
Tony Mauro 13:57
so I hopefully they'll, they'll sell it, you know, and, you know, live happily ever after and but they will need to do some planning, because if they just sit on it, it's definitely, in my opinion,
Speaker 1 14:09
not going to last. Yeah, you know, you just said that sell it made me think of, well, they're going to assume that they did this, Tony, but for those that are out there listening, that are, they're like, Hey, I've got a business. I'm con, you know, contemplating this, hopefully they went through like a business broker, right? You know? Because, I mean, you could sell your business just kind of like selling a house, where it's for sale by owner, and you might be fine, but there's a lot of nuance to selling a business. And do you find that, would you recommend people, if they're thinking about selling a business, to work with a licensed professional in that in that space?
Tony Mauro 14:39
You know, most of the time, I think so, unless you're selling it to an employee or, you know, something like that, like an insider or a family member, okay? Because I think they're gonna be able to bring you a lot of different, you know, options and whatnot, and they're gonna be realistic, as business owners tend to. And I do the same thing. A lot of us think our businesses are worth more than they are, and. A lot of times, you may get buyer, but they want to spread it out over time, which is not a bad tax strategy from a seller standpoint, but it does delay you getting all your money as well.
Speaker 1 15:11
Well, that's a good point too, right? So are you doing owner financing for this deal, or are you just hoping for that one big fat check, because you kind of need that, right? So that plays into all that as well. So lots of stuff to unpack and deal with when you're thinking about selling a business. And to me, I feel like that's where there's so many little places you could step in it and mess up that, you know, certainly seek the guidance of some professionals in that space. You know, with financial like I said, a business broker certainly finding a financial advisor, maybe even if you don't have one, get one before you sell a business. I don't know if this couple here, they may already be in the in the weeds on that, but certainly get a financial professional before you sell your business. So they can kind of start giving you some things to be on the lookout for as well. So I would agree,
Tony Mauro 15:53
and I would say the last person in there sometimes too is an attorney to look over the deal. Oh yeah, definitely. You know, just, just to make sure that it, you know, you're not missing something on a legal standpoint, especially if you're if you're doing some financing, yeah,
Speaker 1 16:07
great point. Yep. You need a team. You need a financial team, for sure, when you're going through this. I mean, we need it in in everyday life. When you work for somebody for 40 years, you need it when you own business, too. So it's the world we created. It is what it is. But better to make the pay the it's worth it. I think the money to pay those little extra pieces to make sure you're, you're doing the CYA, right? You got everything covered, all right? Well, good stuff. Thank you so much for breaking it down, Tony. We appreciate it. Thank you for the question as well. Folks. Good luck to you. Of course, Tony's teams reaching out to them anyway to ask if they need some further in depth questions and things answered. But if you're thinking about selling a business or a home, or, you know, got an inheritance coming your way, or you just need a strategy in general for retirement. Get with Tony and his team at your planning pros.com today and start talking about how to plan with the tax man. You can subscribe to the podcast on Apple or Spotify or whatever app you like, and we certainly appreciate it, and hopefully you enjoy the content and catch some useful nuggets along the way. And with that, we will see you next time here on the program for Tony Morrow, I'm your host. Mark Killian, we'll see you next time.
Walter Storholt 17:13
Securities offered through avantax investment services. SM, member, FINRA SIPC, investment advisory services offered through avantax, advisory services, insurance services offered through an event tax affiliated Insurance Agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.
View all episodes
By Tony Mauro
5
11 ratings
For many business owners, retirement savings don’t show up neatly in a 401(k) or IRA. They’re tied up in the business itself. Today’s listener question comes from a couple facing a sudden transition from “almost nothing saved” to managing a large lump sum late in the game. And they’re wondering if it’s enough.
Important Links: Website: http://www.yourplanningpros.com
Call: 844-707-7381
----more----
Transcript:
Speaker 1 00:00
For many business owners, retirement savings doesn't show up neatly in a 401, K or an IRA. It's tied up in the business itself. Well, this week, we're going to tackle a question from a listener dealing with the possibility of selling a business and what that might look like for their retirement. Look up in the sky. It's a bird,
Nick 00:22
it's a plane. No, it's the tax man. He may not be a superhero, but Tony Morrow has saved many retirement plans with his extreme knowledge of tax planning strategies. It's time for plan with the tax man.
Speaker 1 00:36
Hey, everybody. Welcome into the podcast. This is plan with the tax man, with Tony Morrow from tax, dr, Inc, find them online at your planning pros.com that's your planning pros.com where you can drop a line into the team and get yourself some time onto the calendar, and, you know, ask your questions, get some things answered. And we're going to take a listener question here this week on the program Tony, about selling a business. And I know you've as a business owner, you've also got a lot of business clients, and so a lot of people do find themselves in this position in America, a lot of small business owners. So we're going to tackle this here a second. But first, how you doing? I've been doing real well. You know, I like this topic because it's near and dear to my heart, and we have a lot of clients that I've seen experienced this exact thing we're going to talk about. So I'm excited to talk about that. And Spring is almost on us, so things are good, good. Well, yeah, let's dive in. Let's because there's quite a few additional pieces that is kind of a lot of lot to unpack here for if we want to dive in. And we'll try to keep this within our normal timeframe here, but see if we can help some folks out, if they might be in a similar situation. So here's the setup. The listener says, Look, I'm 60 years old. My husband's 58 we're definitely behind when it comes to retirement savings, because we have basically nothing saved, but we put it all into the business, and we're going to be selling our business soon for just under a million bucks. I'm very nervous about dealing with this large sum of money, since we don't have any investing experience. Wondering where should we start, and Will this be enough to retire? On any pointers you can help would be great. So I guess we can start with a couple of pieces of this Tony. So when you're, when you're selling a, you know, a business, and you've not saved anything, I mean, it is very it's awesome that the business is, first of all, I guess, sellable, enough that you're, they're selling it and making this money, right, right? That's the first step. I think for a lot of business owners, it's like realizing, hey, is this valuable? Is it sellable? You know, is there value there? And then, if you do sell it, now, what do you do? So what's some things to think about here?
Tony Mauro 02:27
Well, I think the first thing to think about is, and we see this a lot, is, I'll tell you, what they all say is, when we start talking about retirement and whatnot, they all that's what they say is, look, I'm not saying for retirement. My retirement my retirement is gonna be my business, and I'm putting all my money into the business. And so when we that's how the conversation starts. And then in this case, you know, I'd love to know more about it, but I'm gonna make an assumption here that they are gonna be at a million. I don't know what just under a million means. Yeah, let's, let's round it off for easy. Yeah. We'll just, yeah, we'll round it off. But what a lot of people don't realize is, if it's a service business like mine, or they don't owe anything on it, you sell a business for a million and you have no basis, which is kind of like, you know what you paid for your stock, then all of that potential money could be taxable, and if you're getting or giving up, say, 20% of it to the feds, another three or four to the state, you could end up with maybe 750,000 total after taxes. And then you also, you know, you got to factor in selling costs and things like that. So I'm just going to use 750,000 so it's not the million you think, because you're going to owe some taxes. Now, there's a lot that goes into that, because that capital gains, Tony, that's capital gains, yes, capital gains, taxes, and so you know, at first glance, you're 60 years old, and you've got 750,000 net to to, let's say, you know, save for retirement. Are you going to retire now or not? Or because I don't to me on the surface this probably, I don't know if it's enough or not. Depends a lot on their lifestyle and what they want out of life. Well, I don't know, yeah, what enough means?
Speaker 1 04:10
Let's break that down for a second. Okay, so based on your question, there is a million enough, or even 750,000 Well, first of all, the ages were 60 and 58 so you can't even access social security yet for either person, and you certainly can't access medical. So those are two pieces that certainly have to pop up, and if you've done no saving at all, then you're basically rocking this 750 grand for at minimum two years before the first person can turn it on for Social Security, Tony and and five for medical right? So that could be a huge problem. You know, in eating away that 750 may not last for someone's lifetime of 20 years more, I definitely don't think it'll last person's lifetime for sure, because if you know it just isn't going to work again, unless you're going to what you. Retirement to you is, you know, 3040, $50,000 a year total. But let's say, like you were saying, You got to go two or three years with spending, let's say 50,000 including, you know, paying for your for your medical and all of that. Well. Now you're down to, you know, 600,000
Tony Mauro 05:18
and you know, you're, yeah, or less. And you know that's not gonna last you 20 years. You know it just won't even at 50,000 a year. Even if you're earning, say, four to 6% on it, it's it's definitely not gonna be enough. I think it's good. You might know that now, yeah, and hopefully, if maybe the sale is not final, right now you're just thinking, maybe you keep it for a while and build it up and or save and then sell it later. That's a possibility. But I think let's say they're going to sell it now anyway. I think what you definitely need to do is get all these numbers with your advisor and start thinking about, you know, spending. I think you should think about, well, what are we going to do for the next 10 or 15 years? Because we really can't, other than this, we don't have any more income coming in. How are we going to save more?
Speaker 1 06:11
Because, yeah, you've got to get a plan together. I mean, you just mentioned, like, if you're making 4% off of the 750 that'd be the first question for someone like this, who doesn't know even where to start. Where do they park it? To get seven, you know, to get 4% right? So you want to get with an advisor. Are you looking at maybe some in an annuity? Are you putting some in the market, you know? Because you need to be a bit more aggressive, because you don't have any other money saved. I mean, there's a, this is where a financial strategy really comes in handy.
Tony Mauro 06:37
I think so. And I hit on a good point I was going to mention, is, I'm not a huge proponent of annuities, but they have their place, and this might be one of them, if, you know, you talk with your advisor and you figure out, I need an income I can't
Speaker 1 06:51
outlive, right? That's what I was thinking. Was the guaranteed income putting, you know, I don't know, you know, 200,000 or something of that into something that generates income. Yeah, it
Tony Mauro 07:00
generates income, and, you know, you can't outlive it, because I think that's the biggest fear with this couple, or biggest threat, I should say that they'll face is outliving this income. And if you've got nothing else coming in, eventually it's just gonna be down to Social Security, which is a meager existence, right?
Speaker 1 07:18
Yeah, so and that. So the whole question of what's Enough? Enough? Well, that's lifestyle. And, you know, all those pieces go into it. So, Tony, if you were, if you if this person came into your office and said, help us out, right? So you would start with, you start putting, kind of the, you know, the strategy together. Start putting an income piece and expenses right. Is, do they is, do they have a home? Is it paid for? That? That changes things, right? Changes things so there's a lot of data that would then go into hopefully helping somebody like this kind of see in black and white, are, where are we? Are you behind? Do you have a shortfall? And how much
Tony Mauro 07:52
exactly a client like this? This is why I love this topic. This is a very, I want to say, complex, but a very in depth conversation you need to have with somebody, with your advisor, because you have to lay all this out, and then you as the client got to be able to picture this. This is what it's going to look like. I've seen it before. And are you okay with that, or do you need to make us, you know, maybe make a change. But I think if you're going to go through it, that you really got to, you know, buckle it down. And, you know, figure this stuff out, the income needs, the expectations on longevity, all that kind of stuff. And so you are not going to get there. And because I've seen this happen too, where they didn't plan. And boy, are they really, I don't want to say upset, I guess the right word is disappointed that they worked all those years, sold the business. Of course, they didn't save anything, and they didn't plan, right? And then they're they're too old, they can't go back and
Speaker 1 08:50
go to work. Yeah, yeah. Well, so it's a temptation for folks like this could be as well, not everybody, but you haven't saved. Well, again, to this person's you know, question, you now have this big chunk of money, and we'll just call it the 750,000 the temptation could be, well, we're behind. Maybe we should go ahead and put a we should get aggressive with a bunch of it and swing for the fences right to make more money to get ready for retirement. So that could be a dangerous place to be, especially if you're not real savvy in what you want to do. Hopefully you don't take, you know, half a million dollars and go dump it into the market, you know, in in an aggressive, you know, portfolio,
Tony Mauro 09:27
yeah, I definitely think you need to start talking with your advisor and discuss the risks of that and diversification. And, you know, why that kind of strategy, you know, that's, that's risky. I mean, it's easy to see to say, you know, hey, these last few years in the market, especially saying, well, we dump 500,000 of this into the market, we get 20% back. That'd be great, yeah, and it would double itself, say, in even if we got 7% double itself in roughly about seven, seven and a half years. Okay, now we're. At a million. But what if that doesn't happen, and we go through a prolonged period of of downturn, even in just a few years, going to be devastating? And, you know, it's just, it would be a bad situation to go into that, if you're going to go into something like that, you better, better
Speaker 1 10:16
know all the Yeah, and that's kind of why I was asking, you know, that question earlier. You know, for somebody like this who's not real savvy, first of all, find an advisor, right? So I guess the first two things would be, take a step back, breathe like, let's Okay, let's, let's assume that deals going through, you're getting this money, you pay the taxes, whatever the case is, you know, don't rush to make an immediate decision, but certainly, take a little time. Do some, you know, do some vetting, and find a financial professional that you can talk to, go talk to a couple, right? Have those interviews and find out the right person for you, and then start discussing the strategy sessions of of what you know, what do I need to know, you know, and what would my Social Security look like when we do get there, like? Because that's going to factor into the strategy, right? So we don't know if they were paying them, if they had this business for 30 years, were they paying into Social Security properly? Is it going to be low numbers, mid numbers, high numbers, like all of those things, are going to factor in Tony to the overall next 25 year retirement strategy? Yeah.
Tony Mauro 11:13
I mean, all that's going to factor in. And I would say, On a different note, I was thinking about it when you were saying that is if we have younger business owners on this, the one thing I would say, and this little conversation frames it is the one thing our government does, I think, extremely well. I hate to even say that, but I'm gonna say it is, they have so many things for us, business owners to save for our retirement. I mean, from cash balance plans all the way down to Roth IRA 401, KS, everything in between. So if you're younger, try not to get to this point. I mean, in other words, you know, start saving through retirement.
Speaker 1 11:53
We talked about even a set, right, a simple anything, yeah, because
Tony Mauro 11:57
you could stash so much money in it and not have this. Then when you sell the business, then it's this million dollars less, less taxes, 750 is just an add on, and not your overall plan. But yeah, so, I mean, I it's not just for the for the people just getting ready to sell. I think it's younger people can have, have get some benefit out of this conversation.
Speaker 1 12:18
Tony, I tell me, if I'm wrong here, you know? I mean, I'm just the host, but, I mean, I've been talking about this stuff with advisors for 10 years. I feel like, you know, the first place that someone like this has to start, obviously, is, like we said, we'd have to, you have to find an advisor that you're comfortable talking to, that you get a good feeling about. And then you got to start asking, this is where the proper diversification is really going to come into play. How much should we put in the market? How much should we be a little bit aggressive with? How much should we have in safety and protection? How much should we set aside on an emergency fund? What you know, what's the House Situation look like, and then obviously dealing with the medical gap that's going to be coming up as well. Those, to me, those are all like the four or five main pillar pieces that I mean, honestly, that's the same for anybody, whether you worked for a company your whole life, or you worked for yourself in your own business, these are the standard pillars of retirement strategies.
Tony Mauro 13:08
That's it, I mean. And it would have to be the conversation with this couple, for sure, but anybody else, I mean, it's pretty much the same conversation we have, like you're saying, with all of our clients, because at the end of the day, that's what really matters. And I think if they're not looking at that and at least getting a big picture idea in which, I think is where the advisor can become valuable, is to kind of keep them grounded and on task. Yeah, there you go. You know, that's worth the fees that you pay, in my opinion. But certainly,
Speaker 1 13:38
yeah, that 58 and 60 they, you know, getting an advisor now and starting to help, you know, helping them work with this large sum of, sum of money. You know, there's a lot of those, lots of little moving parts and things they can help them with over time. To your point, I kind of getting started now, making tweaks along the way. You know, that's, that's a great point, right? So, yeah,
Tony Mauro 13:57
so I hopefully they'll, they'll sell it, you know, and, you know, live happily ever after and but they will need to do some planning, because if they just sit on it, it's definitely, in my opinion,
Speaker 1 14:09
not going to last. Yeah, you know, you just said that sell it made me think of, well, they're going to assume that they did this, Tony, but for those that are out there listening, that are, they're like, Hey, I've got a business. I'm con, you know, contemplating this, hopefully they went through like a business broker, right? You know? Because, I mean, you could sell your business just kind of like selling a house, where it's for sale by owner, and you might be fine, but there's a lot of nuance to selling a business. And do you find that, would you recommend people, if they're thinking about selling a business, to work with a licensed professional in that in that space?
Tony Mauro 14:39
You know, most of the time, I think so, unless you're selling it to an employee or, you know, something like that, like an insider or a family member, okay? Because I think they're gonna be able to bring you a lot of different, you know, options and whatnot, and they're gonna be realistic, as business owners tend to. And I do the same thing. A lot of us think our businesses are worth more than they are, and. A lot of times, you may get buyer, but they want to spread it out over time, which is not a bad tax strategy from a seller standpoint, but it does delay you getting all your money as well.
Speaker 1 15:11
Well, that's a good point too, right? So are you doing owner financing for this deal, or are you just hoping for that one big fat check, because you kind of need that, right? So that plays into all that as well. So lots of stuff to unpack and deal with when you're thinking about selling a business. And to me, I feel like that's where there's so many little places you could step in it and mess up that, you know, certainly seek the guidance of some professionals in that space. You know, with financial like I said, a business broker certainly finding a financial advisor, maybe even if you don't have one, get one before you sell a business. I don't know if this couple here, they may already be in the in the weeds on that, but certainly get a financial professional before you sell your business. So they can kind of start giving you some things to be on the lookout for as well. So I would agree,
Tony Mauro 15:53
and I would say the last person in there sometimes too is an attorney to look over the deal. Oh yeah, definitely. You know, just, just to make sure that it, you know, you're not missing something on a legal standpoint, especially if you're if you're doing some financing, yeah,
Speaker 1 16:07
great point. Yep. You need a team. You need a financial team, for sure, when you're going through this. I mean, we need it in in everyday life. When you work for somebody for 40 years, you need it when you own business, too. So it's the world we created. It is what it is. But better to make the pay the it's worth it. I think the money to pay those little extra pieces to make sure you're, you're doing the CYA, right? You got everything covered, all right? Well, good stuff. Thank you so much for breaking it down, Tony. We appreciate it. Thank you for the question as well. Folks. Good luck to you. Of course, Tony's teams reaching out to them anyway to ask if they need some further in depth questions and things answered. But if you're thinking about selling a business or a home, or, you know, got an inheritance coming your way, or you just need a strategy in general for retirement. Get with Tony and his team at your planning pros.com today and start talking about how to plan with the tax man. You can subscribe to the podcast on Apple or Spotify or whatever app you like, and we certainly appreciate it, and hopefully you enjoy the content and catch some useful nuggets along the way. And with that, we will see you next time here on the program for Tony Morrow, I'm your host. Mark Killian, we'll see you next time.
Walter Storholt 17:13
Securities offered through avantax investment services. SM, member, FINRA SIPC, investment advisory services offered through avantax, advisory services, insurance services offered through an event tax affiliated Insurance Agency. Investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional.