The Boomers Are Coming

Posted on February 1, 2013 by in Blog, Retirement, Strategy

This is a very timely article by Mark Miller. A big part of our practice is beginning to focus on this, and Forward Results has already begun working with business owners. It takes a great deal of time and effort to optimize the business – not just the books – for a successful sale. In short, it takes planning – at least a couple of years out.

 Leonetti trains financial advisers to work more effectively with clients who are small business owners, focusing on exit and retirement strategies. He is the author of Exiting Your Business, Protecting Your Wealth: A Strategic Guide for Owners and Their Advisors.Leonetti says most small business owners are relying on a very illiquid asset for retirement security—the value of their companies. Making that asset liquid isn’t easy.

“For most small business owners, 80 or 90 percent of their personal wealth is tied up in a privately-held, illiquid business” he says. “Most of them don’t know how to take that asset and turn it into cash they can use to support themselves in retirement. And they don’t even know what they don’t know about it.”

Indeed, a report last year by the U.S. Small Business Administration found that small business owners over age 50 were significantly less likely than their employees to have pension or retirement plans, including 401(k)s on their current jobs, although they were more likely to have IRA or Keogh plan savings.

Small business owners can access a range of qualified retirement account options specially suited for them. But Leonetti finds that those accounts usually are dwarfed by the value of the business itself. “They might have $200,000 or $300,000 in an IRA, but the business might be worth $5 to $10 million.”

It’s also possible that as all boomer business owners head toward the exits at the same time, they’ll flood the market with companies for sale during a weak economy and not be able to extract the value they anticipated, says Bill Entwistle, a Rhode Island-based financial planner who advises many small business owners.

“You have owners who are ready to retire, but the business is worth half of what it once was, so they’ve been holding off on selling. Now that the economy is starting to get better the value of the business may be rebounding, but they will all want to get out at the same time,” he says.

“In some cases, you also need to emphasize the importance of disciplining their current spending habits,” he adds. “But the bottom line is you can expect better results if you have more time to plan.”

 

Here

Retirement Benefits

Posted on October 11, 2012 by in Planning, Retirement

Here is a great article outlining the advantages of waiting to take retirement benefits.  We met with a Boomer recently and advised him to stop taking Social Security.  He had taken it for just about a year and he could afford to wait.  The lifetime bonus will mean a great deal to him, and possibly his wife!  Enjoy!

People can begin collecting Social Security benefits when they turn 62, but the full retirement age is 65 for people born in 1937 or earlier, and 67 for people born after 1960. Taking benefits before reaching the full retirement age reduces the size of the payments. People who retire at 62 will on average receive a monthly payment about 25 to 30 percent less than if they waited until their full retirement age.

………………………………………………………………………………………………………………………….

Most people take their benefits early. About 131,827 of the 180,645 recipients of Social Security in Butler, Champaign, Clark, Greene, Miami, Montgomery and Warren counties began claiming retirement benefits at 64 or earlier, according to a December 2011 snapshot of recipients and benefits obtained by this newspaper. More than half of recipients in the seven-county region claimed their benefits as soon as they turned 62. In Ohio, about 73 percent of recipients claimed their benefits at 64 or younger.

Additionally, more Americans are taking the benefits early. In 2011, about 73.8 percent of the 35.6 million U.S. recipients of retirement benefits received reduced monthly payments because they took their benefits before reaching their full retirement ages, according to administration data. The share of recipients who received reduced payments for taking benefits early was up from 73 percent in 2006, 71.3 percent in 2000 and 68.4 percent in 1990.

But delaying claiming benefits until the full retirement age or later is a smart financial decision for many people, because at some point — if a person lives long enough — the payments from delaying surpass the payments from taking early retirement, said Mary Beth Franklin, contributing editor to InvestmentNews and noted expert on Social Security issues.

“Deciding the right time to claim for an individual can mean the difference between tens of thousands of dollars over his or her lifetime, and for a married couple, it can be more than $100,000 over their lifetime,” Franklin said. “I think the biggest mistake is that people take Social Security as soon as they can simply because they can, without thinking it through.”

Franklin said people who are sick or in poor health or who are unemployed and need income should take benefits once they becomes available. Similarly, people who do not have a long life expectancy should also collect early, because they have a shorter window for collection. But she said people should not claim early if they are healthy, have a family history of longevity and intend to keep working. For some people, it even makes sense to delay claiming benefits past the full retirement age, because the value of the payments increase by 8 percent each year they are delayed between the ages of 66 and 70, Franklin said.

“Your benefit at 70 would be 132 percent of what it would be have been at 66, and that’s almost double the amount if you took it early at 62,” Franklin said.

She said people who continue to work definitely should delay claiming, because they will lose $1 in benefits for every $2 they earn over the annual-earnings cap, which is $14,640 this year. The earnings test does not apply once people reach their full retirement age.