In today’s post we discuss what it takes to save a million dollars for retirement and explain how this advice also applies when deciding what to do with your insurance agency after your retirement.
If you are one of the many people who worry about not having enough money to survive on during your retirement then I have good news for you. Even if you earn less than $150,000, it is possible to save a million dollars for your retirement according to Jeanne Thompson, a vice president at Fidelity Investments. During an interview with USA TODAY’s retirement columnist Rodney Brooks she was asked what it takes to save a million dollars for retirement. She advised that everyone start saving early in your twenties in order to benefit from long-term compounding. According to her, “Having that money invested for the long-haul is critical for long-term retirement success.” She also stressed the importance of saving up to the company match. If you are not working at a company that sponsors savings plans then you need to save up to eight times your salary. In addition, you need to have a strong long-term plan that is developed either by you or an advisor. It will take many years but you need to be committed to it and avoid the temptation to spend the money on other things like houses or cars.
Why So Much?
You may be wondering why you need to save so much money for your retirement. The fact is that retirement is very unpredictable as you do not know how long you will live or how healthy you will be. The average life expectancy for Americans is at a record high: 81.2 years for females and 76.4 years for males. If you plan to retire at 65 then you will need to have a lot of money saved up to retain your current lifestyle. As everyone knows health is the biggest retirement expense and you need to have savings to pay for unexpected medical bills and expensive nursing home care. If you are lucky enough to be in good health then you may wish to catch up on lost time and travel around the world. Whatever your plan for retirement, the message is simple: start planning early and have a constructive plan.
What Does This Have to Do With Your Agency?
This important advice also applies when deciding to internally perpetuate or sell your business. I have always found that it is a much quicker and smoother process for the client to make their decision when they have taken the time to carefully consider each option, devoid of any stress. It is essential that you start thinking about your company’s future before your retirement, so you can put in place the changes needed to enhance the value of your business.
Unfortunately, most agency owner’s “Plan” is simply an intention to sell internally or externally. They believe that the plan is implemented when they make the decision that it is now time to implement the plan. The implementation of the plan takes months to years. An internal perpetuation takes more effort and planning than a sale to a third party. There are risks to both strategies. However, the internal perpetuation is clearly the more risky event.
In an old poll on our website, we asked for the reasons why owners sell. The most popular response by a large margin was to fund their retirement. We understand that need and take our responsibility very seriously. We are involved in a transaction that impacts the owner, their family, staff and clients for many years. If you are going to undertake this exercise, make it your highest priority and do it right. Although a million dollars sound like a lot of money, it is usually not sufficient to fund agency owner’s lifestyles. The transactions usually involve much more money. Our smallest deal was over $1 million and our largest was $35 million. I have personally worked on much larger transactions. Whether the deal is small or large, we offer the same level of commitment to the process.
