Worried About the Effect of a Down Year on Your Retirement?

Worried About the Effect of a Down Year on Your Retirement?

You're not alone. A short-term setback can shake your confidence about the future.

Building a business or establishing yourself in a highly compensated career can give you confidence about your financial future. All of your hard work has created something of tangible value, and it seems reasonable to expect a nice dividend down the road—in the form of the kind of retirement you hope to enjoy.

But what happens when you have a tough year? Maybe the profits from your business dipped or you had a loss, or you didn’t get the bonus you were counting on. Suddenly you’re facing two distinct concerns. First is what to do in order to make up for the lost income now. Beyond that is longer-range anxiety about staying on track for retirement.

What a bad year can do

Your concern may be well-founded. A full 78% of polled small business owner clients surveyed said they planned to rely on the sale of their business to fund their retirement. Yet there’s no guarantee such plans will work out. One third of polled business owners over age 50 have a hard time finding a buyer, and only 20% of all businesses ever sell.

Executives, too, are often at the mercy of an uncertain future. Compensation might not meet your expectations, or a reorganization could leave you out of a job. In fact, 56% of surveyed people over 50 working in long-time, steady jobs reported being forced out of employment before they were ready to stop working§. Moreover, however you expect to fund retirement, a tough year could make it that much harder to stick to your plan. In one recent survey, more than half of respondents said their savings were already behind schedule.

Your impulse may be to redouble your efforts to build your company, your career or your retirement savings. But if that doesn’t work you could find yourself facing bleak prospects for retirement, upending your dreams for you and your family.

Scattered assets, unseen issues

A first step in dealing with concerns about retirement may be to realize that uncertainty is natural, says Joseph Wojcik, senior wealth strategist at Huntington Private Bank®#.

“Almost everyone is apprehensive about retirement,” he says. Even a couple with $2 million in assets, which if invested carefully should be enough to support a modest lifestyle after they stop working, might still be concerned about their retirement prospects. In a case like that, Wojcik noted, he would try to help the couple focus on the specifics of their goals and assets through projections that included worst-case scenarios, which may be able to allay their concerns.

It’s also true that lackluster years are bound to come now and again, for any number of reasons. What’s important is how you respond, says Wojcik, and that likely depends on the current state of your overall finances. Looking at the picture more broadly may suggest other issues as well as potential solutions.

For example, Wojcik suggested that an executive whose compensation was lower than expected might have also accumulated significant wealth in “deferred” assets such as stock options and tax-advantaged retirement plans. In this low-income year, it could make sense to exercise some or all of the stock options, when their impact on the executive’s tax bill might be minimized. Paying current taxes on retirement plan assets and converting them to a kind of plan that allows tax-free withdrawals during retirement might also be worth considering. Taking this kind of broader view of retirement planning could help address concerns about current and future tax consequences while also potentially increasing income during retirement.

A business owner, too, should consider the larger context. “Has this in fact been a bad year?” Wojcik asks. “Or have the fundamentals of the business changed?” That kind of realistic assessment could lead to a variety of conclusions, Wojcik says. “Are there other things you might do to prepare for retirement?” he asks. For example, a business owner might explore a sale now to a strategic buyer willing to look past current issues to see the company’s long-term potential. Or the owner could refocus attention on building up assets in retirement plans that would be unaffected by what may happen to the business.

In all of these situations, the immediate and longer-term responses to current headwinds may vary widely. But the common thread is thoughtful planning with an experienced advisor, Wojcik says.

“Part of our job is to work with you to help create comfort and confidence about the future,” he says.


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† Ioannou, Lori. “Small Biz Owners Ignoring Succession Advice: Poll.” (April 13, 2015.)

Project Equity. “The Small Business Closure Crisis.” Project-equity.org. (Accessed August 26, 2019.)

§ Gosselin, Peter. “If You’re Over 50, Chances Are the Decision to Leave a Job Won’t Be Yours.” ProPublica.org. (Accessed July 30, 2019.)

Society of Actuaries. “2017 Risks and Process of Retirement Survey.” (January 2018.)

# Interview with Joseph Wojcik, Huntington Private Bank. (June 19, 2019).

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