Most business owners have most of their financial assets tied up in the equity of their business, which can be a dangerous approach. In today’s episode Grant reviews the importance of investing outside your business – even when it’s growing rapidly. He also talks about different tax advantaged options available and the pros & cons of each.
Show Notes
[02:08] The familiarity bias – Grant starts the episode explaining why it’s tempting for business owners to invest extra cash in their own businesses.
[04:19] Why it’s dangerous – Grant describes, with stats from Exit Planning Institute and BizBuySell, why deploying 100% of your free cash back into your business is dangerous.
[09:50] Exit plan – The importance of having a business transition and exit plan.
[13:36] Available options – Grant talks about what options are available to invest outside your business, starting with different types of retirement plans.
[18:28] Traditional IRA – How you can invest in a traditional IRA and what taxation applies to traditional IRAs.
[24:27] Roth IRA – Grant explains the features of Roth IRAs and why he’s a huge fan of Roth IRAs.
[29:09] Other options – How SIMPLE-IRAs and SEP-IRAs work and things you should consider before getting into these options.
[37:14] The 401(k) plan – Grant discusses qualified retirement plans & 401(k) plans.
[42:00] Working with a financial adviser – Grant describes the process of working with a financial advisor to set up a retirement plan & how he works with clients at Three Oaks Capital.
[46:12] Final thoughts – Grant sums up reasons to invest outside your business and the benefits from doing so.
Resources
BizBuySell 2019 Insight Report: bit.ly/2Tw63PU
Exit Planning Institute: exit-planning-institute.org
Exit Planning Institute Key Takeaways: bit.ly/32Ytch5
SIMPLE IRA: bit.ly/3cIHarS
SEP-IRA: bit.ly/2vDwY3f
Roth IRA: bit.ly/39NrIIN
401(K) Plan: bit.ly/2TMCwQV