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The Importance of Non-Financial Retirement Planning

The Importance of Non-Financial Retirement Planning

January 02, 2023

Retirement planning has long been thought of as saving as much money as possible to live off of for 20-30 years.

Great, you have the money set aside to survive 20-30 years… now what will you do for those three decades?

Below are some insights from the Exit Planning Institute into planning the non-financial aspects of retirement.


The Personal Side of Retirement Planning

There are an abundance of retirement advisors that educate individuals on the financial aspects of their retirement planning. However, these advisors neglect education about their client’s personal needs. Especially for successful business owners, planning a comprehensive personal retirement lifestyle plan is paramount. Research collected for the Exit Planning Institute State of Owner Readiness Reports has indicated that owners are not likely to have a written plan for what they will do after they exit their business.

What will make for a fulfilling next act of your life? According to a 2020 Edward Jones and AgeWave study, 8% of people think of retirement as the beginning of the end of their life. However, 55% view retirement as a “new chapter in their life.”


Who Will You Be Without Your Business?

69% of people struggle to adjust to their new retirement life. In retirement, so many aspects of successful owners’ lives change. They go from being the “Who’s Who” in their respective industries to “Who is that?” seemingly overnight. Many business owners are unprepared to address these changes and suffer an identity crisis. Being a business owner was their entire life, and now that part of them is gone.

Retirement Mindset

Every retiree thinks about retirement with one of two mindsets.

1. Fixed: The best years of my life are behind me. I am over the figurative hill, and the rest of my life will be downhill from here.

2. Growth: The best is yet to come. I am looking forward to experiencing this next chapter of my life.

Business owners might have had a growth mindset when it came to their business but a fixed mindset in their retirement. In order to get the most out of your retirement, you must make that switch to a growth mindset.


The Retirement Honeymoon

We have all heard the old trope of the retired business owner spending their days on the golf course and living a life of leisure. We don’t hear that most retirees get bored of this lifestyle in 6-18 months. It can be referred to as the “Retirement Honeymoon.”

Even retirees with an extensive bucket list of items to accomplish are not prepared for a successful retirement. What do you do when the last item on the list is checked? Without a detailed lifestyle plan, your retirement will feel less like the long vacation you envisioned and more like Groundhog’s Day, forced to repeat the same day over and over again.

Emerging Needs of Retiring Business Owners

Retiring business owners face more concerns than getting an early tee time on their favorite golf course. Some of the most prominent issues they will face are the possibility of divorce, failing to fulfill their post-business needs, and lacking personal fulfillment.


The Threat of “Gray Divorce”

Retirement has a profound impact on married couples, specifically baby boomers. After years of focusing on their career, retired owners have likely spent more time with their spouses during retirement than they ever have. This can lead to tension in their relationship and ultimately lead to “Gray Divorce,” divorce in couples over 50 years old.

Often couples don’t talk about how their new life is going to unfold in retirement. When they are not on the same page, it creates friction in the relationship. The little things add up to create problems in the relationship.

Conversely, relationships can strengthen due to the increased time spent together. With the lack of time spent working on and in their business, retired owners have time to focus on their relationships with their spouses.


Working in Retirement

More individuals are looking to work during retirement. After the “retirement honeymoon” is over, many retired business owners crave the mental stimulation and problem-solving that comes from work. Our 2021 New York City State of Owner Readiness report found that 36% of retired owners planned on becoming a business consultant, 36% plan on starting another business after they exited their previous company, and 58% plan to invest in another business or serve on a business’s board. Owners desire to make a contribution towards an end goal. Going back to work offers them an outlet to do so.

Additionally, 51% of owners shared that they planned on continued involvement in their business even after they retired. 31% said they would continue in an advisory capacity but would not take part in the company's day-to-day operation, and 15% said they would be available in a crisis situation. This shows just how ingrained an owner’s business is in their life.


Adding Lifestyle Retirement Planning to Your Advisory Practice

As Certified Exit Planning Advisors, we are holistic in our process with owners as they exit their businesses. Instead of solely focusing on the financial aspect of their decision, we have deeper conversations about life topics and the importance of planning for their lifestyle. Including:

  • Professional
  • Primary relationship
  • Family and friends
  • Giving back
  • Spirtual and emotional health
  • Leisure
  • Self-development
  • Health and aging

Remember, your successes do not end when you have exited your business. Your next act can include another successful business, significant charitable work, or personal relationship successes. It will be their most fulfilling chapter if you plan for it.

Are You Financially Prepared for Your Next Act?

What is Your Wealth Gap?

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Your wealth gap is the difference between your current wealth and the amount you need in order to live the life you want. To understand your wealth gap, you need to investigate your personal goals and ambitions outside of the business. For example, an owner who wants to own a minor league baseball team in the next phase of their life will need more funds than an owner who wants to retire and live quietly on an old farm.

Your goals, family, extended family, and personal ambitions should all be considered. Once identified, you can determine your wealth gap. Your net worth outside of the business plus the value of your company today equals your goal. In other words, if your goal was $10 million and you had $2 million of assets outside the business, your wealth gap would be $8 million. Thus your company would need to be valued at at least $8 million to close this gap.

Does the value of the business today fill your wealth gap? If the answer is "yes," it is time to ask yourself, "Am I ready to sell my company, and should I?"

If the answer is "no," you need to go on a value-enhancement path where you can grow value in your business by strengthening your intangible capital.

Over the next few weeks, we'll walk you through the perfect, purpose-driven exit. We'll cover:

  1. Planning for your business, financial, and personal goals.
  2. Finding your purpose.
  3. The importance of non-financial retirement planning.
  4. Including family considerations in your personal plan.
  5. Preparing for your next act.

Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. Integrity Benefit Partners is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. 200 Clarendon Street, 19th & 25th Floors. Boston, MA 02116. 617-585-4500. CRN202507-2694019.