WHAT GOES INTO A GOOD EXIT STRATEGY?

Retirement seems like a faraway prospect at age 30, 40 or even 45. However, a retirement plan is essential to ensure that you’ll be able to live comfortably once you are no longer a member of the workforce, and as such, a retirement plan to reduce taxes and maximize funds is indispensable.

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Below you’ll find some tips for an exit strategy that creates a solid, financially viable retirement fund – however, before that, here is the information that proves that a retirement plan to reduce taxes is necessary in the first place.

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Most of Us Will Outlive Our Money

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The average retirement funds an American family has at the age of retirement is around $255, 000. The minimum amount of money needed to maintain a comfortable lifestyle is $40, 000 per year. From this information, it’s clear to see that the average American retiree will only be able to live comfortably for just over 6 years before running out of money. As the average American retires at age 65 and yet lives until age 85, this means that without a retirement plan, you may be looking at 14 years of hardship.

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This sobering fact is further coloured by the fact that, due to inflation, the price of goods and services will continue to rise, which diminishes the purchasing power of a retiree even assuming that they only withdraw the minimum amount of $40, 000 per year to stay comfortable.

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Thus, a retirement plan to reduce taxes will help you avoid what may well be 14 extremely difficult years at the end of life, where expenses such as assisted living and nursing care may further incur expenses.

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What should your exit strategy entail?

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A good exit strategy is one where the retirement plan covers the following facets:

· ? ? ? ? Sufficient savings

· ? ? ? ? Safe investments made in your younger years, to benefit you in retirement

· ? ? ? ? Adequate insurance for healthcare

· ? ? ? ? Final expenses

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Here’s how you can craft a strong retirement plan:

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Minimize Taxes by Contributing To a Retirement Account Regularly

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If you are a business owner rather than an employee, you can reduce your tax burden and set yourself up for a more comfortable future if you make regular contributions to a retirement account. This retirement plan to reduce taxes will benefit you both while you are working and after you have exited the workforce.

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Realize Investment Losses On Your Taxable Accounts

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If your stock purchases are underforming, they can be sold at a loss. This will reduce the amount of taxes you have to pay, and the loss can be offset by larger numbers of safe investments that will result in financial growth and more retirement funds over the course of 20 or 30 years.

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Create Tax-Free Income Against Your Life Insurance Policy

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While it may seem counterintuitive to have a life insurance policy pay for your retirement plan, withdrawing money from your policy against its cash value and coverage creates tax-free income that can be used for your expenses while your retirement account can offload the tax burden from your business.

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Use a Management Succession Plan To Remain In The Workforce

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If your business will be succeeded by an heir, and you do not intend to sell the business, use a management succession plan rather than an immediate transfer so that you can remain in the workforce and pay less taxes for the few years before you fully retire. This ensures you’ll have a head start on your retirement funds by a few years.

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Through these exit strategies, you should be able to craft a retirement plan to reduce taxes that frees up more money for your personal expenses. Thus, it is essential to start planning your exit strategy well in advance of your actual retirement.