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Unique Challenges for Family Businesses in Retirement Planning


Working with retirement plans for family businesses or closely owned businesses presents unique challenges. It’s important for the HR professional and their plan advisor properly deign the retirement plan for this market as one size does not fit all in the 401k world. TPSU Adjunct Lecturer Tim Dougherty who manages the Philadelphia Educational Zone discusses his approach to these businesses which has become a specialty for him.

Entrepreneurs who run family businesses  sometimes sacrifice saving to retirement to invest in their business and can find themselves in their 40s or even older without having saved for retirement. Their main asset is their equity in the business which is risky having so much in one investment which can be volatile.

According to a report conducted by The American College, forty percent of owners of small and family businesses have no retirement savings or pension plan in place even though many are over 50. Furthermore, the study found that three-fourths of those owners have no written plan as to how they intend to fund their retirement. As surprising, many of these business owners do not engage an advisor to help them. Business owners focus so much on growing and maintaining their business, that often their own retirement is put on the back burner.

So when dealing with entrepreneurs or closely held businesses, Dougherty tries to create a plan design that helps these executives while also helping the entire employee base. Along with catch-up provisions, he also tries to engage these executives who may not have established a retirement plan for themselves and may not have access to an advisor as so much of their assets are tied up in the business are not liquid.

When senior management sees the value of the company’s retirement plan for themselves, they are more likely to invest the proper resources for the rest of the employees as well with certain budgetary restrictions. Working with advisors like Tim Dougherty that specialize in this market can make a big difference.

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein

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