Once you’ve sold your business, you’ll need to make a lump sum of savings last for the rest of your life. This can be difficult, even for those who already have a substantial amount saved. Retirement can last for decades, and the risk of running out of money is very real, especially if we see high inflation and a volatile market. So what can you do? Let’s start with some potential income sources in retirement:

1. Investment Strategy

If you have a Solo 401(k), SIMPLE 401(K), IRA, or other retirement account as a business owner, you’ll need to have a plan to draw down your account in retirement. Distributions from these tax-deferred retirement accounts are taxed as ordinary income and may be subject to a 10% penalty if taken before age 59 ½. Generally, Required Minimum Distributions (RMDs) start at age 72, which could potentially mean a larger tax burden. Remember that no one knows what the tax rates of the future are, which is why it’s important to keep taxes top of mind when it comes to tax-deferred retirement accounts.

Beyond your retirement account, you may have other assets that you will draw income from in retirement. We can help you create a retirement investment strategy that takes your tax situation into account, as well as inflation and the potential for market losses.

2. Social Security

Although you will most likely not be able to maintain your current lifestyle on Social Security benefits alone, it can make up a significant portion of your income and is guaranteed for as long as you live. Despite its importance, only 4% of retirees claim Social Security benefits at the optimal time, losing out on an average of $111,000 per household, according to a recent study.1

This means that having a plan for maximizing your benefits is essential. Benefits are designed to replace about 40% of income,2 but this percentage can be higher or lower depending on your earnings history, income needs, and success in maximizing benefits.

3. Supplemental Guaranteed Income

While you may have been comfortable with some uncertainty and risk as a business owner, you may need to reassess your risk tolerance in retirement. Just like Social Security can provide guaranteed regular payments for life, an annuity can also provide steady income in retirement.

An annuity is an insurance-based financial product that accepts funds and then pays them back later in a stream of payments or a lump sum. An annuity can be thought of as the opposite of life insurance, which protects against the possibility of passing away too soon and leaving your loved ones to struggle financially. An annuity can help protect against outliving your money by providing guaranteed payments to you for life or a pre-determined amount of time.3 There are also potential tax benefits: some annuities can be funded with untaxed dollars, and some annuities can offer tax-deferred growth during the accumulation phase.4

REGULATORY DISCLOSURE

Carmichael Hill & Associates, Inc. is a U.S. Securities and Exchange Commission Registered Investment Advisory firm. Registration does not imply that the SEC has endorsed or approved the qualifications of Carmichael Hill or its respective representatives to provide any advisory services. Advisor does not render or offer to render personalized investment advice or financial planning advice through this medium. Advice can only be given after:

  1. Delivery of a disclosure statement by advisor to client.
  2. Execution of our Investment Advisory Agreement between the client and the advisor.
  3. Initial payment of the planning fee or investment advisory fee by the client to the advisor.
  4. Advisor will not solicit or accept business in any state in which she or he is not properly registered or otherwise qualified to conduct business by virtue of a state “de minimis” exemption.
DISCLAIMERS

The information in this web site is based on data gathered from what the Advisor believes are reliable sources. It is not guaranteed as to accuracy, and does not purport to be complete and is not intended as the primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. The identification of specific funds and model portfolios is being made on the assumption that the investor would participate in that investment or portfolio on a long-term basis and only after consulting with their investment advisor to determine their needs and tolerance for risk. With respect to any such identification, there can be no assurance that the fund or model portfolio will in fact perform in the manner suggested.

The results do not represent actual trading due to the timing of the clients’ trades and their trading costs. They may also not reflect the impact that material economic and market factors might have had on the advisor’s decision making if the advisor were managing the clients’ money. Investment and portfolio results may be different than the results the advisor’s discretionary clients achieve due to the timing of trades and the market conditions.

All references that might be made to an investment or portfolio’s performance are based on historical data and one should not assume that this performance will continue in the future.

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