E Planning Your Exit: Thinking Long-Term Keeps Your Business On Track

Yet, even careful succession planning can be bumpy, as Middleman learned when the recession hit in 2008. That’s why owners can’t afford to put all of their assets into their business. Money tucked away in 401(k), IRA or other retirement plans can act as a shock absorber, cushioning owners from any economic potholes they encounter on the way to the exit door.

For young companies, the best retirement savings vehicle might be a SIMPLE IRA, which lets both owners and employees contribute and at higher levels than those allowed with a traditional IRA. As companies grow, 401(k) plans can be a good next step, and Roth 401(k)s – which are funded with after-tax dollars - provide distributions that may be tax free.

Permanent life insurance offers another way for owners to diversify their holdings while creating a potential safety net for both their company and their retirement. Business owners, for example, may be able to borrow on the accumulated cash value in these policies to help meet expenses or payroll during lean times. And if the policies have cash value when the owner is ready to retire, it can be a good source of supplemental retirement income.*

Ultimately, succession planning is about more than simply finding the exit door. It’s also good business. While there are no guarantees, planning that focuses on such things as increasing the company’s value can help keep a business on track while it’s still growing. And that’s a good way to make sure you won’t be leaving your retirement to chance.


*Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the change the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.


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Disclaimer: The information provided is not written or intended as specific tax or legal advice and may not be relied on for the purposes of avoiding any Federal tax penalties. MassMutual, its ...

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