Retirement Planning for Small Business Owners: A Different Approach

By Joseph C. Verga

As someone who spent years as a self-employed trader before becoming a financial advisor, I understand firsthand the unique challenges small business owners face when planning for retirement. Through my own experience and watching my wife build her interior design firm, I’ve learned that entrepreneurs need a different approach to retirement planning—one that accounts for the realities of running your own business while building long-term financial security.

The Small Business Owner’s Retirement Dilemma

If you’re like many of the business owners I work with, you’re probably excellent at what you do. Whether you’re running an interior design studio, managing a construction company, or operating a family retail business, you’ve poured your energy into mastering your craft and growing your business. But here’s what I often see: while you’re focused on your business (and you should be), retirement planning often takes a back seat. I get it. As a former trader, I know what it’s like to have variable income and to constantly weigh reinvesting in your business against personal savings. My wife, who runs her own successful interior design firm, faces these same decisions. That’s why I’m passionate about helping fellow business owners create retirement strategies that work with—not against—their business goals.

Beyond Traditional Retirement Plans

One of the most important lessons I’ve learned is that traditional retirement advice often doesn’t fit the small business owner’s reality. Two key areas where I see this mismatch are:

• Over-reliance on pre-tax savings: While SEP IRAs and 401(k)s are valuable tools, relying solely on pre-tax savings can create challenges in retirement, such as higher tax rates on withdrawals and less flexibility during market downturns.
• Assumption that selling the business will fund retirement: Your business is a valuable asset, but relying entirely on its future sale is risky. Economic changes, industry disruptions, and personal circumstances can all impact your ability to sell for your expected price.

That’s why I advocate for a more flexible approach, combining both pre-tax and post-tax savings strategies. Having both types of accounts gives you options in retirement, allowing you to manage your tax burden and adapt to market conditions. You can be strategic about which accounts you draw from in any given year based on your income, tax situation, and market performance.

The Power of Options in Retirement

One crucial lesson from my trading days is the importance of having multiple options. Just as you wouldn’t put all your investments in one stock, you shouldn’t rely on a single retirement strategy. In practice, this means creating a retirement plan that gives you flexibility.

• During strong market periods, you might lean more heavily on pre-tax account withdrawals, letting your post-tax investments continue to grow.
• During downturns, you could pivot to tax-free Roth withdrawals or cash reserves, avoiding the need to sell investments at lower prices.

This flexibility becomes especially valuable for business owners who may need to access funds during seasonal slowdowns or business transitions. With multiple income streams and different types of accounts, you have more control over your cash flow and tax situation in retirement.

Building a More Flexible Retirement Strategy

So how do you create this more flexible retirement approach as a business owner? Here are some strategies I recommend to my clients:

1. Create multiple income streams:

• Diversify your retirement savings between pre-tax accounts (like SEP IRAs or Solo 401(k)s) and post-tax investments.
• Consider making Roth conversions during lower-income years to build up your tax-free retirement funds.
• Build liquid savings outside your business that you can tap into during lean times.

2. Leverage your business wisely:

• Structure your business to maximize its value to a potential buyer.
• Create systems and processes that make the business less dependent on you personally.
• Consider whether a gradual transition or employee buyout might work better than an outright sale.
• Document your intellectual property, client relationships, and key processes so a new owner could step in more easily.

3. Access expert resources:

At Fountainhead Advisors our team of specialists come together on your behalf, coordinating with vetted partners where necessary, to support you expertise across every aspect of your financial life, including:

• Tax planning specialists
• Estate attorneys Business succession planners
• Investment managers Real estate professionals
• Insurance experts
  

You don’t have to figure it all out on your own—you have a team of professionals working together to support your goals.

Taking the Next Step

As a business owner, you're used to making complex decisions. Retirement planning should support your business goals, not compete with them. Whether you're just starting to think about retirement or looking to refine your existing strategy, I'd welcome the opportunity to help you create a plan that gives you options and flexibility for the future.

From one business person to another, I understand the challenges you're facing. Let's work together to create a retirement strategy that makes sense for you, your business, and your future.

Ready to have a conversation about your retirement planning? Reach out to me at jverga@fountainhead-advisors.com. I'm here to help you build a future that works for you.

Let's Talk About Your Business

About Joseph C Verga

Joseph C Verga is a financial advisor at Fountainhead Advisors, a financial services firm based in Warren, New Jersey, specializing in creating comprehensive, unique financial plans to help clients build wealth. With over 25 years of experience in equities trading, Joseph has a strong background in risk management, investment strategies, and portfolio optimization. He advises hardworking small business owners with a holistic approach to maintaining and growing their wealth. He is dedicated to collaborating with clients to develop flexible, personalized financial plans that allow them to pursue their goals with confidence knowing a professional is in their corner. Joseph takes pride in his work, genuinely cares about his clients, and has a desire to help them plan for every life chapter. He says, “Everyone’s path is different and none go in a straight line. Your life and journey are unique to you. Your financial plan should be tailored to grant you the freedom to adjust to these experiences.”

Joseph holds a bachelor’s degree from Princeton University and a Juris Doctor from Fordham University School of Law. Outside of work, he is a devoted family man, married to Miriam Silver Verga, a small business owner, and father to four daughters. Joseph and his family are members of Temple Emanuel in Westfield, active hikers, and love hosting backyard parties for family and friends. Avid collectors and enthusiasts of fine arts (attending several shows a year), they also consider themselves movie and Broadway buffs. To learn more about Joseph, connect with him on LinkedIn.

The information contained in this article is for informational purposes only and intended solely to provide educational content I find relevant and interesting for clients. All shared thoughts represent my opinions and are based on sources I believe to be reliable. However, nothing in this report should be construed as investment, legal, or tax advice. I provide investment advice on an individualized basis only after understanding your unique circumstances and needs and after entering into an agreement to provide investment advisory services through Fountainhead Advisors.