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Has the Pandemic Turned into Your Retirement Trial Run?

August 21, 2020
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A self-evaluation in retirement readiness 

The new coronavirus has changed the way everyone does business, and for some business owners it might also be offering an eye-opening look into the future.

I am not talking about future economic stability, market trends or a virus vaccine. I’m talking about how day-to-day life today may be a major lifestyle change including some elements that feel like…retirement. Or at least some elements of what you might think of when you hear that someone has retired.     

This may be great news! Some business owners are relishing the opportunity to achieve better work-life balance – whether they’ve been able to spend more time on the golf course, with close family or in the garden – and this downtime has given them the opportunity to dip their toe in the pool they’ve been working toward for a very long time. 

But for others, being suddenly – and continuously – stuck at home after a decades-long routine of going into the office or being out on the road is a jarring life change. This may include feeling a loss of purpose, outright boredom, being overwhelmed (or underwhelmed?) by too much ‘together time’ with a spouse or significant other, or other realizations that never would’ve presented themselves in normal circumstances. 

Whether you’ve appreciated this respite or are ready to panic, consider this a great opportunity to reflect and learn. What has your stay at home time meant to you, and your future? What insights has it given about yourself that you can use to be better prepared up to, and through, retirement? 

As you ask yourself these questions, I encourage you to consider four key shifts in perspective that are especially important for business owners who plan to retire – whether those plans are imminent or many years in the future.

Understand the emotional and lifestyle implications of stepping away from your business

Almost every business owner I work with is deeply invested in their business: personally, emotionally and financially. They know the “blood, sweat and tears” it took to build the business, they know every detail of the legacy that they’ve built, what the company is worth and how they plan to “cash out” to realize their financial dreams.

And this is a wonderful thing. But what most owners overlook is what happens to those personal and emotional piggy banks when they step away. Even those who have had enough and are ready to move on are often surprised to find themselves very unprepared to separate emotionally from their work. 

Consequences of this untimely discovery can manifest in many forms including getting cold feet before closing a sale, the inability to extract oneself from day-to-day activities and decision-making, or a retire-fail, when former owners realize too late that they want back in. In this last situation, the circumstances to enable some sort of a re-entry are almost always less favorable than they would have been if this role had been anticipated and planned for.

“The transition following the sale of a business must be clear, anticipated, and planned,” says longtime business attorney Justin G. Vaughn. “This is a major life change, and the unprepared business owner who finds himself drawn back into the business is a source of confusion and frustration for everyone.”

Vaughn also points out that entrepreneurs are “a rare breed who work hard and take personal responsibility.  Those qualities cannot be disconnected overnight, and the sudden loss of focus and purpose can be traumatic.” For this reason, Vaughn counsels business owners to find something to replace the object of their personal ambition and it’s one of my priorities to help business owners adjust to this mindset long before the reach the closing table or walk out of their office for the last time.

Know that you can “retire” or “re-tire”

In his book, “The New Retirementality,” author Mitch Anthony takes a very insightful look at the many surprises and pitfalls that can come with retirement. Most importantly, he offers realistic recommendations that allow even the most invested business owner to approach retirement more informed and with a plan that works for them.

One of Anthony’s concepts is to “re-tire” or retool what you do after you step away from your first career. He uses the analogy of tires on a car becoming imbalanced after long periods of use, to illustrate how our lifestyle and habits can fall out of balance when we swing too far in one direction or another.

By putting on a new set of tires and ensuring they are carefully balanced, Anthony helps people set their sights on the next “100,000 miles,” helping to refocus their goals and move forward with purpose. What this looks like for you is as individual as your skills, dreams and resources.

There are myriad directions you can take when you “re-tire,” but to be clear, this is not the same as “un-retiring” or “failing” at retirement, which is much more reactive and often very difficult and painful to do. When you re-tire, you do it on your terms and you lay the groundwork ahead of time.

Part of the process we explore when I sit down with business owners is to clarify their needs and expectations for retirement. When we talk about lifestyle goals, we’re not just talking about what kind of house or car or vacation you envision. We’re talking about how you want to use your skills and your time after you retire.

One business owner I’ve been working with has been navigating his pre-retirement journey and has even “practiced retirement” as part of the process by reducing his hours.

“Over the past year and a half, I have gone through a lot of different emotions and thoughts,” he told me recently. “I reduced my involvement in day-to-day operations and moved into more of a consulting role.

He went on to explain “I had questions that ranged from ‘Do I really want to sell?’ to ‘Am I getting fair compensation?’ My wife and I had a lot of thoughtful discussions with the various professionals we work with in legal, financial, accounting and coaching; and they have been very instrumental in helping me wade through the decisions that needed to be made.

Now we have a clear picture and we’re feeling excited to get the deal done. As we enter the next phase of our lives, all of those professionals will still be valuable advisors to assist on the journey.”

Business owners like this one have plenty of options to consider. This may include charitable activities, mentoring, or even a second career. Many business owners have other interests or talents that they never invested in or considered because they had blinders on. We explore those opportunities and lay the foundation to pursue them as little or as much as they like in retirement.

Consider the financial implications of your new perspective

Now that you’re seeing retirement through a different lens, you may have new considerations for what you really want and need. If you have a financial plan for selling your business, you may have had your eye on a specific sales price for some time. But looking at that same number through a new, more holistic lens, you may find it’s time to refresh your planning to ensure you have the financial means to power what comes next. 

Now is the time to look beyond your ‘bucket list’ trips to set new goals that support the level of work and play that will feed your whole self. This may include philanthropic strategies and even considering how to manage a new and very different sources of income. Business owners routinely tell me that this can be a big adjustment because it’s so different from what they know.

In fact, this combination of the unknown and perceived lack of control can paralyze the planning process for many business owners. Our process is designed to help you understand – way before considering what to do in post-retirement – if you can retire or even should retire.

You probably already know that you can sell your business in a lot of different ways each of which should be modeled out so you – and your spouse – can make informed choices. You may consider, for example, whether you need to sell now, or are better off by taking a couple of years to improve the balance sheet. Either is a reasonable choice, but you have to have the information to make the best decision for your needs. This is about putting all the “what if’s” on the table and taking the guess work out of the process. Consider this: you probably routinely “run the numbers” to make informed decisions in your business; and you should do this for your retirement plan too.

Don’t go it alone: Get your partner on board

All of this modeling and financial detail can be overwhelming for those not working in the organization or with a business-minded role. As a business owner, you’ve been making financial decisions for years or even decades, and you’re probably comfortable making dozens of decisions – big and small – on your own every day. But when it comes to retirement decisions that impact you, your spouse or partner and your family, they may be less comfortable with the enormity of it all. 

But there’s good news: there’s never been a better time to get them up to speed, and it’s really imperative that you do. Even if your spouse hasn’t been involved in the business or shies away from the idea of digging into the details, they will play an important role. Now it’s your turn to ensure that it’s an informed one.

I feel so passionately about the importance of this step – communication with key family members – that we help to become the catalyst for these discussions, and it’s actually something we insist on when working with business owners. And it’s easy to see the value that comes from it, in protecting your family, and your legacy for generations to come. 

We won’t be stuck a home forever. What will your ‘new normal’ look like?

With these shifts in thinking, you can start to see that retirement isn’t the end of your planning; it’s a milestone along your journey. Now you can begin to think about what’s next in your life after you retire from your first career, and ensure you are both financially and emotionally prepared to make those dreams come true.  

Peter F. Tedstrom, CFP®, is Founder and Chief Advisor at Tedstrom Wealth Advisors. Reach him at PeterT@tedstromwealth.com