By Michael Garvin
Many of us have strengths in certain areas, but no one is an expert at everything. When one finds they are in need of expert advice, they turn to a professional in that field. As a Financial Advisor, I seek to help clients build a financially secure future. My passion is to construct customized financial plans to help families and business owners achieve their financial goals. Whether it’s your goal of retirement, saving for children’s college education, or having enough disposable income to give to charity – I can help establish an integrated plan. I have had a diverse professional career in sales, management, risk analysis, research, insurance and investments. As a result, I have a unique ability to navigate complex challenges, and get results. I absolutely love working with small business owners – you are the backbone of the American economy; your drive, passion and industry specific knowledge is truly inspiring!
The term “Humanization” has been used in the grooming industry, and it caught my attention; the term, of course, refers to a trend where owners and groomers treat pets as humans, providing them with human-like services such as pet boutiques, pet hotels, pet accessories, etc. I love that because it got me thinking of about how we should use more “humanization” in the way we treat each other in business, instead of as robots who give us money for the services we provide. Of course, I’m preaching to the choir here because I’ve seen first-hand the work ethic, compassion and attention to detail you have in your grooming businesses. I recently read a quote on a social media site that said, “No matter how educated, talented, rich or cool you think you are, how you treat people ultimately tells all.” Wow, is that ever true!
You’ve spent your whole life working and building your nest egg. Now it’s time to put your assets to work so they can generate income for your retirement. As you approach the golden years, you may have questions such as: How should I consolidate my assets? How can I generate income from my retirement savings? Do I have enough money saved to pay my bills, and afford a comfortable lifestyle? When I work with clients, I find the most pressing question they have is, “Will my assets last through retirement?” Nobody wants to live in fear that they will run out of money, or be a burden to their children.
As a small business owner, you don’t want to make the mistake of assuming you can one day sell your grooming business and sail off into the sunset with no worries. According to the Amercian Pet Products Association (APPA), the grooming industry is projected to grow at least 4% through 2018, which shows the increasing demand for your services.
Despite a favorable outlook, there are no guarantees. Investing in your own business makes sense. Many businesses achieve significant growth each year. However, when you consider that many small businesses fold every year, it becomes clear that banking your retirement solely on the success of your business might not be the best idea. There is no guarantee that your business will continue to grow or even maintain its current value. If your business is worth less than you were counting on at the time you planned to retire, you could be forced to continue working or sell it for less than what you were expecting.
As a small business owner, it’s imperative that you have a business succession plan in place that will accomplish what you truly want. As you know, the grooming business is hard on the body, so during your working years, it’s important to make sure you are actively building your asset base to compliment the probable sale of your business. Business owners often assume that their businesses will be their main source of retirement funds, but that strategy could be riskier than you think. It’s generally not wise to put all your eggs in one basket. Broadly diversifying your assets may help protect against risk.
A simplified employee pension plan (SEP) is a deferred-compensation arrangement that is similar to a profit-sharing plan; it’s tailor-made for small business owners in the grooming industry like yourself. It can be set up by self-employed individuals, as well as sole proprietorships and partnerships. You receive tax deductions for plan contributions made to employees’ accounts, and employees do not pay taxes on SEP contributions until they begin taking distributions (generally, in retirement). Annual contributions are limited to the lesser of $53,000 or 25% of your compensation (in 2015). Contributions are made on a discretionary basis, which means that you can decide each year whether or not to contribute, as well as how much to contribute, which means you’re in control!
When you begin taking distributions from a SEP IRA, the rules are essentially the same as those for a traditional IRA. Distributions are taxed as ordinary income and cannot be taken before the age of 59 ½ without incurring a 10% federal income tax penalty, except in the case of extenuating circumstances. For example, penalty-free distributions may be allowed if an individual is unemployed, buying a first-time home ($10,000 lifetime max), or cannot pay medical expenses.
SEP IRA account owners must begin taking minimum distributions after reaching age 70 ½. As a self-employed grooming business owner, a SEP IRA may be a good option for you, because contributions may be tax deductible and this type of plan is easy to establish and administer. If you are an employee of a company that offers a SEP IRA, you can benefit from the potential to receive employer-paid contributions.
So what do you do first? Depending on the level and complexity of your retirement income needs, you should have a financial advisor help you with the following: Develop a budget for everyday expenses, provide multiple models for retirement spending patterns using a variety of analysis strategies, propose solutions to help overcome projected shortfalls, and most important – create a full financial plan, which will address taxes, inflation, projected growth of assets, your individual risk tolerance and time horizon. With access to comprehensive platform of investment solutions, a financial advisor can help you bolster your portfolio to create a sustainable income stream from your savings.
Established in 1832, Janney Montgomery Scott LLC provides comprehensive financial advice and superior service to individual, corporate and institutional investors. A full-service, financial services Firm, Janney is committed to providing our clients advice through a wealth management approach by focusing on the delivery of strategic financial plans that utilize a variety of financial products and services best suited to help meet their financial goals. Janney is equally committed to providing our corporate and institutional clients objective advice for the successful execution of their unique business plans. Janney provides advice and service to clients through a network of professionals in branch offices located along the entire east coast. Janney is an independently operated subsidiary of The Penn Mutual Life Insurance Company, one of the largest mutual insurance companies in the nation, and is a member of the New York Stock Exchange, Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. Janney Montgomery Scott offers individual and institutional clients a full range of investment opportunities for their personal and professional financial needs. www.StoufferGarvinFinancial-Janney.com