Listen in as Al and John explore the unique challenges and opportunities self-employed individuals encounter when planning for retirement. By examining real-life scenarios and sharing practical advice, they emphasize the importance of preparing for the future today to avoid financial insecurity tomorrow. Discover valuable strategies to create a stable and rewarding retirement without depending solely on your business for income.
Welcome to Retirement Unpacked with Al Smith, owner of Golden Eagle Financial. You want a retirement plan that alleviates your fears about the future so you know your money will last. As a chartered financial consultant, Al Smith will help you find a balance between the risk and reward of the market and the safety of your retirement income. And now, here’s your host, Al Smith.
SPEAKER 03 :
Welcome to another program of Retirement Unpacked. I want to thank you for tuning in. I have really good information for you this afternoon. Before I dive into that, I want to let you know that if you’re not really sure if you’re on track for retirement or if you have some questions or maybe if you fall into that category, I of having both para and social security and you’re not sure how that’s going to work with the new law give my office a call and we can have a conversation my number is three zero three seven four four one one two eight This afternoon, we’re going to be talking about retirement for the self-employed. A lot of my conversations have been around 401ks and pensions and things of that nature, but it’s a completely different picture for folks who are self-employed, whether they’re someone by themselves or if they have a business with 30, 40, 50 employees, there are different situations, different circumstances, different things to be concerned about when you’re self-employed. And I have a special guest today, John Rush, who in addition to his show and his automotive show on the weekend, has many clients that he coaches guiding them to make their businesses successful john thank you so much for being a guest on my show uh what do you find is maybe a drawback or a shortcoming with what self-employed folks are doing or not doing for their retirement well al thanks for having me i always appreciate being here appreciate you being a part of my show from time to time so very happy to be here and
SPEAKER 04 :
Man, what a loaded question, because reality, Al, is I think for a lot of self-employed people, and those of you that are listening that are self-employed, you can most likely relate to what I’m talking about. I think, Al, what happens to a lot of us, because I’m one of those, you get so caught up in the day-to-day of running your business, you’re raising a family, you’re doing all these different things, and The reality is, in some cases, you’re trying to irk out a living. You’re literally trying to make sure cash flow is getting handled, payroll is being met, all these other things are happening. And a lot of times what happens, and I think it’s more often than not, you forget about you. where you’re going to be on down the road when you’re no longer able to you know run your business and so on and I know a lot of owners they get this idea that well I’ll just you know pass the business down to the kids and they can pay me out over time and that’ll be my retirement or I’ll sell the business on down the road and I’ll have some income out of it that way and that’s my retirement and while those things can happen Al and I’m not discounting those You know me. I like to have more than one plan, and I think you need to make sure you’ve got some backup plans on top of what some of those things might be. And I believe in diversification and making sure that all of your eggs aren’t in one basket.
SPEAKER 03 :
Well, that makes the most sense because I know when I talk to people about maybe some kind of an expense, maybe it’s for life insurance or one thing or another. And sometimes people who are self-employed will have a response that, well, I don’t have any extra money like like. I don’t know what extra money is. There’s just money. And if you wait for extra money because maybe the business has its ups and downs, rather than biting the bullet and say, I’m going to set aside this amount for my retirement because if I don’t do it, no one else will.
SPEAKER 04 :
No, what you just said, Al, is – and I find this a lot with folks that I coach, even business owners that have done this for quite some time – you wouldn’t be surprised because you meet these people on a regular basis, but I think the majority of individuals out there would be surprised at the, I’m not trying to be rude, Al, but the literal lack of planning on the retirement side when it comes to a lot of self-employed individuals because they’re counting on a particular stream that, quite frankly, may not be there down the road.
SPEAKER 03 :
Well, exactly, and I know some people believe that their businesses will be a source of their retirement, and that varies enormously.
SPEAKER 04 :
Oh, a lot.
SPEAKER 03 :
Because if you own a McDonald’s, that has some value. An accountant, a prospective buyer can look at your books and so forth. On the other hand, if you have some kind of business that is totally dependent on you, a physician, a consultant, an attorney or something like that.
SPEAKER 04 :
A talk show host.
SPEAKER 03 :
Yeah, a talk show host. Yeah, are you going to sell your talk show business to someone with a lisp?
SPEAKER 04 :
No, we’re laughing, but yet, Al, that does fit into what we’re talking about, which is not my normal way of doing things. Normally, I start and own businesses. I get other people to come in and run them, and they start running themselves and do that end of things, which is what I like to own. And one thing I will say about being a host is, It’s been way different on that end of things because it is what I do on a daily basis. It’s hard to get somebody to come in and replace you and have that larger footprint, if you would. And there are those types of businesses, and you mentioned a few of them, to where, yeah, that changes the retirement perspective greatly because the business may not be much of a plan in that retirement end of things on down the road, meaning you better be doing other things outside of that or you’re going to be in a world of hurt someday.
SPEAKER 03 :
Well, very much so. And I think one way of looking at what’s the value of a business is if you are the business owner and you left for three months, how well would that business do?
SPEAKER 04 :
That is a great way of looking at it. And the reality, and I’m not joking when I say this, Al, the reality is the majority, I believe this wholeheartedly across the country, the majority of those types of businesses, if the owner were to leave indefinitely, have an illness. I’ve known some tragic situations, even of late, Al, to where the owner dies for whatever reason. Might be a freak accident, something along those lines. And now the family is left trying to figure out what are they going to do with that particular end of things, and are they going to continue to have it to make money and so on and so forth. And the reality is, and again, I’m sorry to say this, Al, but the majority of those don’t make it because that owner didn’t plan an exit strategy properly, so when he or she is no longer there, it folds.
SPEAKER 03 :
Well, exactly. When you are a business owner and you’ve owned your business, and let’s say it’s reasonably successful, as you get closer and closer to what we can all define as retirement, only one of a few things can happen. You can maybe sell it successfully. That might work out really well. Or what happens if you die? If there are more than one owner How do you have that buy-sell agreement structured? I’ve heard circumstances where people have an agreement and they say, oh yeah, my wife’s gonna take over my shares and she’ll just get the income that I was getting. Well, the wife’s been raising kids, and she doesn’t know anything about repairing automobiles or a talk show or financial services like I do. And so having a buy-sell agreement where there’s more than one owner, having one that’s bulletproof is incredibly important if you don’t make it to retirement.
SPEAKER 04 :
Absolutely. Yeah, no, Al, everything you’re bringing up. And I refer you to even a lot of my clients at times because I know they haven’t done some of these things and they’ve got to get on the stick. And unfortunately, in some cases, they’re behind. And we can talk about some of that maybe throughout the rest of the program. But I always say this, even talking about you on my show, never too early to start. I also believe it’s never too late to start, although the later you start, the harder it is to get caught up.
SPEAKER 03 :
Well, right, and I have repeated this over and over and over that there’s three things that will determine the size of your nest egg, how much money you set aside, what kind of return you get on that money, but the most important component is the length of time, which is basically like saying how soon you start. And if somebody is 30 years old and they put $7,000 into an IRA, Every year, by the time that 30-year-old is 65 years old, he or she will have $1,036,000 in his or her IRA. If someone puts it off till age 50, this is the extreme. he or she will have $189,000 in his or her IRA. And there’s various scales in between and so forth. Even with no more contributions, that 30-year-old, if he lets it sit until 70, it will grow to $1.4 million. So even if you don’t believe your business is successful enough for you to extract money from it to set aside for retirement, I would highly recommend that. Because as I mentioned before, if you don’t take care of your retirement, no one else will. It’s real easy if you work for someone else. You just sign up for your 401k and you be sure you put in at the very least the amount your company is going to match. And then you put it on cruise control.
SPEAKER 04 :
Exactly. And I think that’s where, and you know this, Al, a lot of times people get into business because they’ve been in that private world where they’ve worked for somebody else or maybe they were even a government worker and they decided, hey, I want to go into business for myself. And so they do. And by the way… very admirable and I appreciate all owners I think it’s a very admirable thing to get in and do I’ve been one for you know literally my whole adult life and it’s very rewarding it’s also very challenging but when it comes to you and the retirement end of things you’re making a great point prior to that This has been handled, the retirement thing has been handled for you, typically by your employer or those that are around you. And when you become self-employed, you are that person now. You are the one in charge of not only yours but potentially your employees’ future when it comes to retirement and so on. And honestly, Al, as I said earlier, the problem is you’ve got so many other day-to-day tasks in running the business that, frankly, that’s one of those things where I’ll do it tomorrow. I’ll do it tomorrow. I’ll do it tomorrow. Problem is, as you know, Al, tomorrow never comes.
SPEAKER 03 :
No, no, it doesn’t. But the word retirement is not in the Bible, but neither is long-term care or aged infirmity.
SPEAKER 04 :
Really quick, Al, I think everybody’s got a different definition of retirement. For me, and I had this goal at a very early age, for me and the way I defined it and still do in my life is when you get to the point in life where you’ve done enough things financially speaking to where you can wake up every day and do what you want to do and not wake up every day and do what somebody else requires you to do. To me, that’s retirement. You may still be working because you love working. You love doing whatever it is you do. You love owning businesses. You love whatever the case. But on the same token, Al, if all of a sudden all of that went away, would you still be financially secure? And if you can say yes to that, well, in my opinion, you’re quote-unquote retired.
SPEAKER 03 :
Well, exactly. And I think we can distill that down to working because you want to, not because you have to, to pay the bills. And some people think, oh, gosh, you’re self-employed. You don’t have a boss. Yeah, you do.
SPEAKER 04 :
You have a lot of them.
SPEAKER 03 :
You have a lot of bosses. Everyone who comes into my office, we were talking before about you get a lot of emails. I get a lot of emails. If someone wants to make a withdrawal from their investment account and they send me an email, if I miss that, that’s my boss that I have to answer to and have to say, sorry, I missed your email. Your distribution’s going to be a day late. And that’s why we have to stay on top of whatever it is we do for a living if we’re self-employed, because all the customers or clients we have, they are our bosses.
SPEAKER 04 :
As well as, in some cases, vendors and banks and spouses. And I can go down the list, Al. The reality is you’re right. You don’t have just one boss. You now have a multitude of bosses.
SPEAKER 03 :
And some can be described as associates, people with whom you do business because it’s a very beneficial symbiotic relationship, but that needs to be maintained in order that you can best serve your clients. And some of the things people can do who are self-employed, an IRA is the obvious thing. You can put $7,000 a year into it, and there’s an enormous number of different places where you can invest your IRA. I kind of favor the stock market because over the long term, it has done well, but people can choose precious metals, CDs. You can even invest in real estate in an IRA. which becomes more complex. But the important thing is to set aside the money and have it grow and create a structure so that it can pay you back later. And I would highly recommend if you’re younger, especially as a Roth IRA, because we don’t know what the tax rates will be in the future, but we know what a zero tax rate looks like.
SPEAKER 04 :
Awesome. You know, really quick to the other thing, Al, that that I appreciate about everything you’re saying is, A, you need to have a plan. Of course, we always talk about have a plan, work a plan, have backup plans, all of these different things. And again, I appreciate all self-employed individuals, but this happens to end up being an area where I’m sad to say the majority don’t do this because, again, they get so caught up in all of the day-to-day of just life. And I get it. I am fully understanding of that and fully sympathetic to it. But really, folks, those of you that are listening, If you haven’t started down that journey of figuring out where will I be when I’m in my mid to late 60s, if you have not done that yet, I would highly recommend you call Al and set an appointment and get started on that journey because it’s, as I said earlier, never too early to start, Al. And yeah, it can be a little late at times, but you can still catch up if you do it early enough.
SPEAKER 03 :
No, you’re absolutely right. And two things I’ve never said to a client. I began this business in life insurance. I never met a widow who felt her husband had too much life insurance. And I never met someone in retirement who thought he had saved too much money. We’ll talk more about that, especially about how you work with your clients in order to guide them right after the break.
SPEAKER 01 :
You’ve saved responsibly for years for your retirement. And now’s the time to structure those savings wisely with Al Smith of Golden Eagle Financial. There are a lot of unknowns in retirement planning, but Al can help you figure out how to make your retirement dream a reality. Let Al help you figure out if your retirement accounts are diverse enough and if they match your risk tolerance. Let him help you understand how things like life insurance and real estate can fit into your plan. Al doesn’t just use a systematic process. He is relational and gets to know you and your goals. personally. In this uncertain economy, Al helps you keep ahead of inflation so your retirement isn’t dwindled away because of rising costs. If you or a loved one needs some extra wisdom in your retirement plan, contact Al Smith of Golden Eagle Financial to start a conversation. There’s no obligation. Find him on the klzradio.com advertisers page. Investment advisory services offered through Brookstone Capital Management LLC, a registered investment advisor. BCM and Golden Eagle Financial Limited are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
SPEAKER 03 :
Welcome back to Retirement Unpacked. We’re talking with John Rush, who has a practice where he coaches people who own businesses. And one of the things that I think is incredibly important, and I will plug a book by Ashwan Gawande called The Checklist Manifesto. The book is incredibly important, and he points out how systems, businesses, families, aviation, things run much, much more smoothly if there is a checklist involved. And John, I was going to ask you, is that something that you work with your business owners when you’re sort of taking a checkup on how their business is doing?
SPEAKER 04 :
Absolutely, and I like that checklist thing because I do that personally and I get my clients to do the very same thing. I’ve never formally called it that, but yes, that’s exactly what we do. And the other thing that I try to get owners to think about is, A, you know, What stage in life are we at right now? How old are we? I mean, are we in our 30s? Are we in our 50s? Are we in our mid-60s, Al? Because each one of those things will change when it comes to what are we going to do in the after-work life. Call it retirement, call it whatever you want, but the after-work life, I call it. And so what I try to get them to think about is, What have I done to plan? And it can’t just be the business only. While the business might be great, it might be super successful. You might even have some family members, some kids, some siblings that maybe want to take over. That’s all great, Al, but I can tell you multiple stories where dad sells business to son and Son ruins business, runs it into ground. Dad has to get back into the business to get it built back up again, to even try to sell it again, to recoup some of what son lost. And I’m not exaggerating when I say some of these things. These things happen. And if that is your only main plan for what to do after you’re done working, that’s not a very good plan.
SPEAKER 03 :
No, especially if the business is an automotive repair shop in Wheat Ridge and dad lives in the villages in Florida.
SPEAKER 04 :
Correct. Correct. So, again, folks, those of you that are self-employed, I can’t encourage you enough to really sit down and evaluate. And I know it’s tough. But trust me, I’m an owner. I’ve been one my whole adult life. And I understand the time factor of everything, Al. But what I will say is carve out the time. Sit down between, if you’re married, of course, sit down with your spouse and determine, you know, what’s this going to look like on down the road? Which, by the way, I will tell you that typically most partners, especially male and female, that end of things, typically wives, they like this aspect of where are we going to be on down the road? What is that going to look like? What’s that map look like as to how are we going to get there? And these conversations, by the way, they don’t mind having, Al. In fact, it’s quite the opposite. They enjoy it. having these conversations. So you men especially, you male owners, really think about what I just said and have you sat down and had those conversations. And maybe you have. And if you have and you’ve got a great plan, great. You know what? Don’t worry about it. You can get a checkup with Al and off you go. But I’m afraid, Al, there’s far too many that have never really had a formal conversation conversation along those lines they may talk about a few things in passing like boy wouldn’t it be nice to you know settle down in florida where it’s warm all year long and maybe some of those conversations have been had but have they ever sat down and figured out okay how do we get from where we are now to where that will be at that point in time, and how are we going to structure, financially speaking, all the things it takes to make that happen? Oh, and by the way, if my business fails some way, somehow, like COVID, which we talked about during that break a moment ago, things that are beyond our control, okay, if those things happen, what’s our backup plan look like? And I’m afraid, Al, far too many don’t do that.
SPEAKER 03 :
Well, very much so. And when you talked about that, like moving to Florida or something, I think of it in terms of how can we monetize that dream? Good point. Because if we know that our home here is worth this much and to buy a home in Florida is going to cost that much, but in order to do that, if it’s 10 years down the road, you’re going to need to set aside some money and create an exit strategy from that business. I think the longer ahead people plan for the sale of a business, the better off they will be. I always give the two ridiculous examples of owning a business. a chiropractor or a therapist, a psychologist, something like that, your practice is you. And without you, it has no value. If you own a McDonald’s franchise, I don’t know of anyone who goes to a McDonald’s because they like the owner.
SPEAKER 04 :
They don’t even know him.
SPEAKER 03 :
No, it’s not that the owner’s a good person or a bad person. You have no idea who it is. Is it some guy who’s scraping by to buy his first franchise or somebody that owns a dozen of them and he lives out of state?
SPEAKER 04 :
Correct.
SPEAKER 03 :
And so having your business more like a McDonald’s and less like a physician or a chiropractor or something like that where the business is entirely the owner… That will make the business worth more.
SPEAKER 04 :
Absolutely. Oh, and Al, in some cases, and I’m not exaggerating when I say this, I try to teach all my owners, work yourself out of a job, buy the things that you just mentioned a moment ago so that things will run by themselves. And Al, I don’t think I’m far off in saying this. In some cases, you could have a multiplier of 5 or 10 on that business valuation doing what we’re talking about. Because in some cases, Al, if you’re the nucleus of the business, it’s worth what the hard assets are on the open market, meaning they might bring 20, 30 cents on the dollar, and that’s essentially all the business is worth.
SPEAKER 03 :
Well, exactly. And people who, when I go to big events with other advisors like myself, they talk about the value of practices and so forth. And some of them have unbelievably high value, but they have streams of income that are going to continue and continue and continue. Correct. And if a financial practice were valued based on the hard assets, a few computers and – Some desks and chairs and so on.
SPEAKER 04 :
That’s about it, right?
SPEAKER 03 :
Yeah. Yeah.
SPEAKER 04 :
It would be a – Well, and really quick, what we’re talking about for a lot of you that are owners, think about it this way. As your business runs itself – It now becomes a cash machine, and I know that maybe is an exaggeration, but literally, Al, investors that would come along and want to buy it where they know, hey, I can buy this. I can maybe help it run and maybe even run a little bit more efficiently than it is currently, but I don’t have to spend every waking moment. that I have at that business to make sure that it functions, I can literally just grab the keys and that cash machine just keeps making cash. Well, when that happens, Al, the value of said business is much higher than if it’s not a cash machine, but rather in some cases it’s sucking cash. Because the owner is putting money in on a routine basis to keep things afloat because it’s all him or her that makes it happen on a daily basis. When I said a moment ago that you can literally take that business and increase its value by 10, I’m not exaggerating.
SPEAKER 03 :
No, you’re exactly right. And what these high-level consultants do is they try and totally examine businesses, even really enormous businesses, and isolate what are you doing or what is the business doing that is bringing in the most revenue and put your focus there.
SPEAKER 04 :
Yeah, and again, folks, those of you that are owners, please, I cannot stress this enough. If you haven’t sat down with somebody like Al, Al himself, sat down with your spouse and really determined this path, this mapping of where you’re going to go and how you’re going to get there. And I know, Al, it sounds challenging at times, but really, it’s not that challenging. It’s literally a roadmap on how to get there. But if you don’t start making that map, you never will.
SPEAKER 03 :
Well, and it’s a cliche where they say pay yourself first, but if you don’t establish your own future financial health, then you’ll be dependent on government or the VA or whatever. medicaid or some things that aren’t very pleasant and that’s not how most people want to think about their retirement think about what you would want your retirement to look like whether you are self-employed or not and give my office a call if you’d like to have that conversation 303-744-1128 john thank you so much for being my guest i really appreciate it And God bless everyone who’s listening. And hopefully you’ll be here next week.
SPEAKER 02 :
Thank you for listening to Retirement Unpacked with your host, Al Smith of Golden Eagle Financial.
