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Section: Planning for Retirement & Succession

Planning for Retirement and Succession

Is Your Business Your Retirement Plan?

If so, you could be putting all your eggs in one basket. There are several options for supplementing your retirement income. Your Penn Mutual financial advisor can help you decide which one is right for you.

Qualified Plans:

401(k), 403(b), SEP, SIMPLE

Non-Qualified Plans:

401(k) Overlay, Deferred Compensation, Executive Bonus Plan

Cooking Up a Spicier Life

Joanne has conducted a dental practice for the last 20 years. Six years ago her niece, Liz, started working there part-time throughout high school, and she continued throughout dental school. Since Joanne has no children, she wants to eventually sell the practice to Liz. All the patients know and like Liz. But Liz doesn’t have any money to buy the practice from her aunt since she still has several outstanding loans. Joanne has put most of her money back into the practice over the years and has been slowly funding an IRA, which has grown nicely over the years, but will not be enough to fund her retirement long-term.  Joanne envisions a slow transition out of the business over the next ten years, and eventually she wants to work a few days each week. This will give her time to start a part-time catering business, since her other passion is food. 

Her Financial Professional Shows Her How to Get Cooking

Joanne schedules a long overdue meeting with her Penn Mutual financial professional, and they discuss how to create a plan for Joanne to slowly shift away from the dental practice to the catering business. Together they design a succession plan and buy-sell agreement that spells out the specific terms for transitioning the business over to Liz. To fund the agreement, Joanne also takes a life insurance policy on Liz.   

An Important Ingredient for a Retirement Recipe

Since Joanne is still several years away from retirement, her Penn Mutual financial professional recommends establishing a 412(e)(3) defined benefit pension plan. The plan will provide a known amount of guaranteed retirement benefits, and will allow Joanne to make larger tax-deductible contributions to catch up on her needed retirement savings.  

Without corporate savings plans to fall back on, business owners have unique challenges when planning for retirement.  Fortunately, your Penn Mutual financial professional can explain options specifically for business owners to help you plan the retirement of your dreams.

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