Guest Blog: Don't Forget Yourself

​In our last Zinsurance blog, we focused on ways you as a business owner can attract and retain top talent, while also protecting your business. In this blog, I asked Matt Hudack with Financial Synergistics Group to share strategies for the business owner. Too often, business owners focus on everyone else when making plans for their business’ and family’s future.

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I hope this blog will remind you how important it is to not forget yourself.  - Lori

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Many business owners think about building their businesses, gaining market share, hiring, training, and keeping the right people. Yet, one day, you will wake up and start to think about how long you want to continue to build the business and be at its helm. Too often, that realization of being ready to transition the business occurs without the thought and planning necessary to realize the full financial return on your blood, sweat and tears that you desired.

This blog is to encourage you to start thinking about it now, and not to wait, but to plan along the way. In most cases, the business is a business owner’s largest asset expected to fund the owner’s retirement. Is this what you are expecting? Without proper planning this could be more of a pipe dream than a tangible reality. The astute business owner should also consider other assets of value outside of the business, while also leveraging assets for greater value-building for retirement and the company as a whole.

In Good Shape for the Future

A husband and wife who owned a fitness studio were looking for a way to increase their savings for retirement, while wanting to offer a retirement benefit for their five instructors.  Planning over the past two years, it was deemed best to move the company away from a Simple IRA to a 401k with a safe harbor match so the owners could still receive maximum benefit even if their instructors were not contributing their maximum amounts.  Switching plans afforded the owners the ability to contribute up to their max for 2022 of $20,500, while offering matching to their instructor employees at 4% of their salaries.  The switch to the 401k only added $1000 of costs for the employees, while increasing what the owners could contribute. Employees were also able to get free financial planning advice as a benefit of working at the studio. Additionally, the owners added keyperson insurance to protect the business and help fund things like lease payments, paying instructors salaries so they don’t leave, and meet business overhead expenses in the event something unforeseen happens to either one of the owners.  These simple measures protected the owners’ lifestyle, their business, and their employees’ futures.  

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5 Ways Not Forgetting Yourself Pays Off 

Not forgetting yourself is investing in yourself. You are valuable to your business, your family and everyone’s future. Consider these ways to take care of your own needs while also everyone else’s:

1. Group 401(k) – Safe Harbor & Education Matter: Many business owners grow frustrated by having a 401k plan that no one is contributing to, therefore, the business owner cannot maximize their contributions as a result. When you own a business with five or more employees, a 401k with a safe harbor matching component allows owners to contribute their maximum percentage allowed, regardless of the level in which employees choose to give for matching.  Still want to see employees maximize their contribution ability? The key is to position the 401k with the value-added benefit of a no-cost-to-them financial planner who helps educate them on the strategic benefit of leveraging income brackets. For example, an employee making $85,000 salary who contributes $4000, then puts them in a lower tax bracket, effectively helping them gain additional disposable income through contributing more to the plan. A financial planner working with your employees takes the responsibility off of you, so you can focus on other business matters, and gives them an advisory sounding board to share their financial dreams and hopes. 
   
   
2. SEP and/or Solo 401k: This makes the most sense if you don’t have employees or have one or two on payroll. According to Investopedia, SEP-IRAs were introduced as a way to let small business owners establish a retirement plan and have become popular due to their simplicity to administer. Both are tax-deferred retirement strategies. However, a Solo 401k can also have Roth contributions so you can choose to receive a tax break now or in the future. The SEP-IRA allows individuals to save up to 25% of their income into the account. With a solo 401(k), individuals can save up to 100% as an employee contribution, up to the annual dollar threshold, and also gain employer contributions of up to 25%. A self-employed business can open a SEP IRA and a Solo 401k plan and contribute to both plans, so you may want to consider offering both as a competitive advantage. 
   
   
3. Employee Tenured Bonus Plans: You need people to stay with your company and think long term if you hope to transition the business one day. When it comes to who is key to your business carrying on without you, don’t forget to consider your loyal clerical and support staff. If you only think about executives, you may be leaving them taking over a business with no operational continuity. Consider what we have coined as Tenured Bonus Plan that rewards your employees for their longevity and loyalty. Operating similar to executive bonus plans, the bonus is calculated based on an agreed-upon amount set aside as a bonus for the employee, with monies accumulating tax deferred over a predetermined period of time, typically ten years. 
   
   
4. You Are a Keyman Too: You are a valued employee of your company along with everyone else you have on payroll. Remembering your value to the company also means that you should have a keyman life insurance policy that covers the business and your family’s needs should something happen to you unexpectedly. 
   
   
5. Corporate Owned Life Insurance (COLI): You may want to consider a corporate owned life insurance policy naming the business as the sole beneficiary to fund the operating capital for the business should something unexpectedly happen to you. Forms of COLI include key person life insurance that pays the company a death benefit upon the death of a key employee or owner and buy-sell agreements that fund the buyout of a deceased partner or owner of a business.

Taking care of business also means taking care of yourself and your family along the way. Knowing and considering your options will help make your business one that employees truly value, along with anyone interested in acquiring it.

For Your Future,

Matt

Matthew Hudack
President
Financial Synergistics Group, Inc. 

P.S. If you haven’t had a chance to read the Zinsurance blog, Attract, Retain, Protect, CLICK HERE.

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BIO: Matt Hudack is President of Financial Synergistics Group, Inc., overseeing all aspects of the firm’s operations, client relations, and strategic development. For over 35+ years, Matt has provided his expertise in personalized financial planning, business planning, employee benefit plans, estate planning, and retirement planning in partnership with attorneys’ and CPAs’ clientele. With an emphasis on providing perspective and guidance for empowering generations, Matt also recently debuted his firm’s blog, Pure Perspective.