Traditionally, retirement was envisioned as a time to relax and spend less time working. However, maintaining an active career is a “dream” for many successful business owners.
Northern Trust Wealth Management, based in Chicago, conducted a poll of company owners in December 2024, and 32% of respondents stated they planned to keep working rather than retire. Another 20% said they were interested in starting a new company. 19% of those who have sold their corporations reported keeping themselves occupied with leisure activities like travel or sports, while 29% reported launching new enterprises.
Northern Trust’s director of business services, Eric Czepyha, thinks that this shift in retirement thinking is the result of more than simply people living longer and better lives or a post-pandemic reordering of priorities that prioritizes volunteer work above golfing. Czepyha, on the other hand, gives a less philosophical explanation: Strong M&A (mergers and Acquisitions) activity has provided them with more money than they would need to retire, with a projected global total of US$5.1 trillion in 2021. These things add to opportunities and incentives to put your money to work rather than let it sit idle.
The Northern Trust Institute questioned more than 150 business owners in the third quarter of last year to get insight into this topic. Almost two-thirds of those questioned had yearly business revenues of more than US$50 million, and they want to give 70 percent of their fortune to their immediate family members. This desire for a “new” retirement necessitates additional planning, such as the appraisal of potential investment options and the preparation of heirs to inherit family wealth portfolios that may contain several enterprises and other complicated or hands-on assets.
The polled business owners all had specific plans for their fortunes. While more than 90% of people have some sort of estate plan in place, others may be put off by the amount of preparation a more active retirement may need and instead rely on gut instinct or make arrangements on the fly.
In this regard, Czepyha explains that you’re planning for the possibility of additional complications down the line. He says that growth in the family tree, potential real estate investments, and the establishment of a family foundation all make it more challenging to establish a foundation for the family’s financial well-being.
When it comes to preparing for retirement, business owners have many choices, from setting up their heirs to succeed them to assessing potential new investment options and sources of cash. When making these transitions, Czepyha thinks it’s crucial for business owners to leverage methods learned in the family firm.
He explains that the company is well-organized because it has a board of directors, a clear policy for making decisions, and regular updates on its progress that are shared with shareholders every three months. Business owners may reap the same rewards by applying the same strategies while exiting or selling their company.
This is crucial information for anybody thinking about beginning a new venture. Czepyha observes that business owners’ balance sheets can be intricate since they may include a variety of loan and equity assets, as well as other potential sources of money. These vary in complexity, loan terms, and individual tax ramifications, all of which should be carefully evaluated before making a decision.
A well-thought-out strategy outlining the kinds of direct investments that are wanted is also helpful; this strategy should include investment assessment criteria and the people making the decisions. An informal group of trusted advisers, such as friends, relatives, or professionals, may be convened for this purpose.
When it comes to retirement, even the most well-thought-out plans of company owners might shift. This is the case for some people because they have voluntarily reduced their workload, while for others, it is required for health reasons.
Czepyha claims that business owners and other team members must explain their duties. It is possible to prevent arguments within a family by making sure everyone is on the same page about what they are responsible for and how they may get out of doing certain things. Successful heirs sometimes take on many positions, each with its own set of obligations, such as board member, employee, and shareholder. In the event of a change, it will be easier for everyone involved to have a shared understanding of their respective duties and responsibilities.
This may be especially helpful when launching post-career projects like a family foundation or investment fund. If difficulties arise, Northern Trust recommends having a shareholder agreement in place that includes a way for family members to sell their interests and leave the business.
Instead of telling your heirs about business, show them. With retirement age comes the chance and frequently the desire to spend more time with the next generation of the family, which is why many company owners choose to retire. Seventy percent of those surveyed said they intend to keep the firm in the family, so it stands to reason that they will devote some time to passing on business and life advice to the next generation.
Instead of just instructing their children what to do, Czepyha recommends that company owners actively encourage entrepreneurialism among the next generation by modeling the pursuit of one’s hobbies themselves.
He argues that many of his clients utilize their financial success to foster more cooperation within their families. A trust or family limited partnership might be established with funds and guidelines for how family members, especially younger generations, may use those funds to invest in businesses.
In extensive investment packages, this becomes crucial. Czepyha argues that giving heirs some hands-on experience may help make sure that even unusual investments, such as venture capital and real estate, are ready for them when the time comes.