Why Retailers Should Be Planning for Retirement, Now

At this year’s RPMDA convention, I ran into a familiar face in an unfamiliar setting: Doing a double take, there was indeed Jeff Ponte. Ponte spent 14 years in the MI industry, largely at Mel Bay here in my hometown of St. Louis, so seeing him all suited up in a booth was something of a surprise. I learned that he had moved over to the financial sector, and today is an advisor at the Edward Jones investment firm.

Our conversation quickly turned to how some independent retailers could benefit from some help in making the best plans for the future. “A lot of people in this industry, especially the smaller shops, know they should be planning for retirement, but don’t realize that it’s easier and more attainable than they might realize,” Ponte said.

For the hard-at-work, getting-the-most-dollars-out-of-the-holidays MI retailer, December doesn’t lend itself to pause, reflection, and planning for the New Year. That said, a resolution to make sure you’re on a path that will allow you a decent retirement – to strum your guitar on your front porch to your heart’s content or finish that piano concerto – demands consideration.

(Not surprisingly, it’s recommended that you should first visit with a financial advisor whom you can trust and establish a relationship with. This is serious business; interviewing several for a good fit is recommended.)

Ponte poses some questions and offers some insights for those wanting to ensure they’re on the right path:

 

How close are you to your retirement goals?

“Your comprehensive investment strategy should include a reasonably good estimate of how much money you will eventually need to sustain the retirement lifestyle you’ve envisioned,” Ponte says. “At least once a year, you should evaluate how much closer you’ve gotten to your goals than the year before.”

 

Are you making sufficient progress toward your goals?

“When assessing your progress, try to determine if your portfolio is properly allocated between stocks, stock-based vehicles, bonds, government securities, certificates of deposit, and other investments. If you’re ‘overweighted’ in a particular asset class, such as cash, you may be impeding your ability to move toward your goals.”

 

Are you adhering to your investment strategy?

“To stick with your investment strategy, ideally you can invest at regular intervals,” Ponte says. He adds that getting out of the store and meeting regularly with your financial professional to review your progress and make adjustments is key, as the market can change fast. He acknowledges that regularly reviewing your portfolio is challenging, especially for those running their own music store, but developing a strategy and sticking to it offers a good change for achieving your goals. “For example, during any given year the financial markets could be down, and your results might be disappointing. Nonetheless, if you have built a diversified portfolio containing quality investments, and your portfolio is well suited to your own risk tolerance and time horizon, you don’t necessarily need to make changes following a down year in the markets.”

 

What aspects of your life and business have changed in the last year?

Ponte says that any investment strategy for the typical MI storeowner or employee should reflect what’s happening here and now, and not just whether you dropped one guitar line in favor of another, or you’ve decided to try to expand your lesson program. Marriage? Divorce? New addition to the family? Youngest left for college? Opened another location? “If there’s something fairly big that has changed, then try to determine what impact these changes might have on your long-term financial strategy and if you need to adjust that strategy in response.”

 

Are you rethinking or changing your retirement goals?

Now that you’re a little older, maybe you won’t be retiring to a private island next to the one Julia Roberts owns in the Bahamas. Perhaps your love of the business will keep you willingly behind the counter – or another scenario, moving over to consulting, being a rep, or maybe moving over to manufacturing. “Any significant changes you make to your retirement plans will likely have a big effect on your savings and investment strategies, so you’ll want to incorporate these changes into your planning as soon as possible.”

 

For Your Employees

Years ago, working in L.A., I had a good friend who had a small business with less than ten employees that supplied recording studios with tape and other supplies and was, during the 1990s, wildly successful (Axl Rose, recording and re-recording Chinese Democracy over a decade, alone, represented a sizable chuck of his business!). He asked me once, “iIf I were able to offer my employees, many of whom are musicians under 30, a 401(k) plan, would that make this place a more attractive place to work?”

Absolutely. Because even if the typical young adult isn’t thinking about retirement, they appreciate that you’re thinking about it, and it makes them feel that your store is likely a step above the rest at a similar pay grade. Also, there are potential tax benefits as contributions, even modest ones, are deductible as a business expense. Doing a little research on your own can provide options on how to do this, and like anything else in the world of financial planning, needs to be revisited from time to time.

First thought is usually setting up a 401(k) plan, because that’s what most of us are familiar with. That’s actually better suited for larger companies. Ask your financial advisor about plans better suited for the MI small business owner, including a Simplified Employee Pension Plan (SEP IRA).

Now, for MI stores with 10 employees or less – of which there are many – these two plans offer tax-deferred growth potential, allowing contributions to grow without being diminished by current taxes; that employee contributions deduction; and a tax credit of up to $500 for certain expenses incurred while firing up the plan and keeping it going.

More questions for you: Do you want your employees to be able to contribute their own money to the plan you set up? And what is a higher priority – maximizing contributions or keeping it all as simple as possible?

Is figuring out any of this out and finding the time to get the right financial advisor to help your through it all fun? No. And, as most of us are musicians, given our personality types, it’s easy for us to kick this can down the road – possibly indefinitely.

But that probably wouldn’t be the most prudent of moves. Taking care of your own retirement plans is crucial to your security and happiness. And taking care of your employees is likely crucial to the long-term success of the business you’ve already put so much time, energy, and creativity into.