Friends,
This week, we will continue to discuss core financial areas that should be revisited in the New Year. We will dive deeper into our thoughts and questions surrounding retirement savings, estate planning, and business exit planning. Refer to our initial overview of financial planning for 2025 for further areas of review.
Retirement Savings
- Did you retire this year, or will you retire in the next five years?
- An end to a successful career can be daunting. We are here to help guide you through the many questions that you might have. Specifically, “How will my finances look in retirement?” A strategy for retirement should be developed over several years. We have great financial models that can create clarity for this process.
- Do you have questions about Required Minimum Distributions?
- Required Minimum Distributions (RMDs) start at age 73 for qualified retirement accounts such as 401(k)’s and traditional IRAs for those born between 1951 and 1959. The age to start taking RMDs increases to 75 for those born in 1960 or later.
- Do you have a cash flow plan for retirement?
- Retirement can bring lots of changes centered around cash flow. We get asked all the time, “How much cash should I have on day one of retirement?” and “What is the source of my income now that I don’t have a paycheck?” We can help discuss where to source living expenses, as each account could have varying tax consequences.
Estate Planning
- Has anything changed regarding your estate?
- Have you bought or sold a property/business recently? You might want to consider any property changes, addition or subtraction of heirs, and acquisition of material belongings as indications that your estate documents need updating.
- Are your documents (Will, POA, etc.) up to date?
- It is important to address updating your will, trust documents, and Power of Attorney. Typically, one should consider updates every 5-7 years.
- Do your beneficiaries need to be revised?
- Updating beneficiaries on accounts is important for estate planning and may need to be revisited particularly if there has been a divorce or death recently. Having an outdated beneficiary listed could materially impact the outcome of your desired bequests.
- Are you planning to make any non-charitable gifts (to family members, etc.) this year?
- The annual gift exclusion limit is $19,000 per recipient. Married couples may give up to $38,000 per person for 2025. Gifts beyond this amount would be subject to the Gift Tax, or one would use their Lifetime Gift and Estate Tax Exclusion of $13.99 million for 2025. This value is set to sunset this year unless extended by the Federal Government.
Business Exit
- Have you updated your business plan for 2025?
- If you are struggling to finalize your 2025 business plan, we can help to build a team to help you continue to run a successful business.
- Are you taking maximum advantage of qualified retirement plans for business owners?
- For eligible employers starting a new plan, a tax credit is available for the first credit year and each of the 2 tax years immediately following. This credit allowance can provide a deduction of up to $5,000/year.
- Do you have a succession plan?
- Creating a clear succession plan is critical for your business to operate if you become incapacitated or pass. Should you consider life insurance for key people in the business?
- Are you looking to exit your business in the next few years?
- Selling your business is a complex process that might have multiple exit routes. Let us know if you would like guidance through this process so that you can find the best solution for you.
- Have you been approached by a potential buyer and want to learn more about the selling process?
- Receiving an offer is exciting, but unless you have experience with prior business acquisitions, we recommend engaging an M&A advisor to help consider all of the opportunities to close a deal that is best for you. We are happy to make introductions to successful investment bankers or brokers who have experience maximizing outcomes for business owners considering a business transition.
- Factors such as price, timeline, payment schedule and other terms are critical to understanding a potential buyer's offer.
Should you have any questions about this above, please contact us to discuss it further!
Andrew