I’m a Retired Small-Business Owner: 5 Ways I Knew I Was Financially Ready To Retire
Written by
Cara Danielle Brown
Edited by
Jenna Klaverweiden
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When working a traditional 9-to-5 job, most workers have a sense of when they can and will retire. But for small-business owners, this decision can feel a bit more like the Wild West. That’s because most of the planning, research and overall diligence rests squarely on their shoulders. So how do small-business owners know when they are secure enough to take this major life step?
GOBankingRates spoke with successfully retired small-business owner and former software developer Matthew Laine to find out the five main ways he knew he was financially ready to retire.
He Had a Firm Financial Foothold on All Necessary and Chosen Expenses
While some people find it prudent to plan for retirement decades early, others approach the decision of when to retire as more of an art than a science — which, one could argue, mirrors the experience of being a small-business owner.
“Although there was planning for retirement, such as saving funds for the future, I did not stop to think about retirement,” Laine admitted. It wasn’t until big life events like the COVID-19 pandemic and a geographical relocation that he began to wrestle with the future.
For Laine, it was the security of “being able to pay your bills completely, on time, and without stress that accompanies … household expenses, childcare, schooling, transportation, medical and healthcare as well as the occasional vacation,” which served as the major financial signpost that he was ready to retire.
He Got Confirmation From a Financial Advisor and an Investment Manager
Now certain his business was stable, Laine researched and hired both a financial advisor and an investment manager to help make key decisions and educate himself on the options available for his financial future. These professionals “can help you with retirement planning, succession planning and investment strategies that align with your business objectives,” wrote editor and financial expert Adam Palasciano.
Laine stated it was through “careful budgeting, anticipating our future needs and life planning software provided by our investment manager” that he and his wife assessed their spending and confirmed they could be comfortable in the years to come.
He Set Clear Financial Goals and Devised an Appropriate Strategy
Business owners are risk-takers by definition, which is why it may be prudent to temper this in one’s later years to ensure a market fluctuation doesn’t decimate your bank account. Laine decided it was important to him to mitigate risk, instead prioritizing the safety and security of money in the bank to the potential rewards (or losses) investments may generate.
“My investment manager encourages me to invest in equities where investment growth has a greater potential in contrast to bonds and cash, but I am reluctant,” he said. But he’s not too reluctant. “Although, when an opportunity comes along to snag a good deal, I’m all in,” he explained.
It is for this reason that his portfolio is balanced yet tipped slightly in a 40%/60% split between equity and conservative investments that he prefers not to dip into. For increased stability, he also decided on an annuity as a way to shift risk away from himself and onto an insurance company. While not a short-term investment, the annuity will provide a predictable income strategy in the form of a lifelong, pension-like cash flow.
He Waited To Max Out Social Security
“The decision to wait until (age) 70 was very easy: free money,” Laine said. “I didn’t need Social Security to live on before 70, so I chose to wait to gain the extra benefit. As it turned out, it was the right choice.”
In other words, when it comes to retirement, more money, fewer problems.
He Shifted His Mindset
Not to be overlooked in feeling financially ready to retire is the mental component. “As a business owner, the focus can be on your customer or your employees,” stated Zaneilia Harris, president of Harris & Harris Wealth Management Group. “It’s a mindset adjustment. You have to decide to put your future first.”
For Laine, planning for retirement felt like planning for an entirely new life — but one that has been just as rewarding.
Note: Matthew Laine is a pseudonym.
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