NO MATTER WHERE YOU ARE IN YOUR SPA career, from newbie spa director to seasoned spa owner, planning for your future makes good business sense. Unfortunately, retirement planning, no matter what your age, is becoming a tricky proposition. It used to be that there were just a few options to choose from when thinking about retirement. These days, however, retirement planning is complicated by a confusing range of optional plans, not to mention the much longer average life span that future retirees must consider. Then there's the issue of inflation and its long-term effects on your retirement portfolio. These days, one of your biggest retirement challenges is figuring out ways to make your money last as long as you do.
Today's retirees are not only living longer, they're also enjoying better health. Age 65 was long regarded as the benchmark for "old age." Today's retirees can expect to live 20 or 30 years beyond that. While those additional years are a welcome bonus for most people, they also introduce the risk of outliving your savings. That's why keeping up to date on managing your personal finances has become so important.
As a spa owner or practicing professional, you don't have a mandatory retirement age. You can continue to work as long as you and circumstances permit. Whether you will hang it all up at once or gradually phase out of your career is a choice you will have to make somewhere down the road.
One important choice that you must make now—if you haven't already made it—is how you will fund your retirement years. Whether your savings are already going into a tax-favored retirement plan or an investment portfolio, your plan should look ahead to when you finally leave the working world. The earlier you start planning for retirement, the more choices you'll have, whereas the longer you wait, the fewer options you'll have.
Your retirement plan can be as simple as an individual retirement account (IRA), or you can opt for a Roth IRA, SEP, Keogh, or 401(k). The best choice for you will depend on such variables as whether you have employees, the size of your business, your age, and your plans for business growth. This is a choice so important (and so complex) that you should seek the advice of your accountant or financial advisor before committing yourself. Whether you will benefit most from a retirement plan that defers taxes until you begin withdrawals, or whether it's best to pay taxes on your retirement investments now and enjoy tax-free withdrawals at retirement, is a decision you should make with the help of a professional.
As your circumstances change, you will want to make certain that your retirement plan continues to reflect your changing needs. Your accountant should be a partner in this important part of your business life.
Among other circumstances that can affect your retirement are the never-ending changes in our tax laws. For example, the Pension Protection Act (PPA) of 2006 signed into law by President Bush last summer is profoundly important for many future retirees. PPA makes permanent the increased contribution limits to IRAs, 401(k)s, and other qualified retirement plans that were scheduled to expire in 2010. For those who can afford to make the maximum allowable contributions, this change greatly enhances retirement security. PPA has a number of other provisions that can impact your retirement planning. Check with your tax advisor to see if any of them affect you.
Retirement & Your Spa
Another important aspect of your retirement plan involves your business itself. Will you sell your spa? Liquidate it? Pass it on to a family member? You may not be able to answer this question with certainty now. Still, it should be a consideration in your long-range plan.
You may decide to sell to an outsider or simply groom a family member or someone else to succeed you. If you choose either of these options, you will need to decide what role, if any, you want to play once you are no longer at the helm. For example, would you like to stay on as an advisor or consultant for some specified period? If so, will you fold the arrangement into the selling price, or will you structure the sale to provide income for yourself during the transition to new ownership? Some business sales are structured in a way that provides for the former owner to stay on as a consultant for a period as long as several years.
There are a number of other arrangements that can be part of your transition to retirement. You may, for example, arrange to scale back your work to part-time while you continue to draw a salary. Your bill of sale may also include separate compensation for a non-compete agreement. If you own the real estate that houses your spa, you may decide to sell it along with the business or retain it as a source of continuing income by renting it to the buyer or another tenant.
Regardless of the many variables that you may have to deal with over the years preceding your retirement, you should not wait until retirement is just over the horizon before developing your strategy. If you do, you'll find that your options are far more limited. The time to forge your plan for achieving a comfortable and secure retirement is right now.
William J. Lynott is a freelance writer whose work appears regularly in leading trade publications and newspapers as well as consumer magazines. You can reach him at [email protected] or through his website www.blynott.com.