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Selling your business: Planning for the proceeds

Kelly Kowalski, Cliff Noreen, and Bronwyn Shinnick

Posted on September 13, 2023

Our executives and experts team up to write educational articles, covering a variety of financial topics such as life planning, college savings, and retirement.
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Discuss creating a strategy for allocating proceeds from the sale of a business.

Outline the retirement funding considerations that come into play after a business sale.

Note that family relations and changes in lifestyle will likely come into play when considering these questions.

One day you’ll sell your business or transfer it to the next generation. You have a succession plan, so you have a good idea who will be eventually taking over, when the planned sale or transition will take place, and how much money you will have after the deal closes.

Regardless of when you plan to sell the business and to whom, it’s important to put a strategy into place now, for how you will manage the proceeds from the sale. This is especially important when the sale of the business is the culmination of a career, and the beginning of your retirement.

Create a strategy for allocating proceeds

Your strategy for allocating proceeds for your retirement should first address sources of retirement income. Social Security, your qualified plan (like a 401(k)) and any pension you may have will provide you with an amount of money each month to help cover your fixed living expenses, such as housing, food, clothing, transportation, insurance and the like. (Retirement planning calculator)

If these sources of income are not enough to cover these — expenses and the lifestyle you envision —you could take a portion of the proceeds of the sale of your business to secure another source of guaranteed, predictable income to make up the difference (and perhaps account for inflation). Your primary goal for the proceeds is to help ensure that you don’t run out of money during retirement.

Consider your retirement

The next thing to consider is how many years you’ll live. With medical advances, expect a long retirement — longer than your parents’. Depending on the age you sell your business and begin retirement, you may live another 30 or 40 years. That’s a long time. (Discover more: Baseball's longevity lesson)

Historically, retirement advice has leaned toward more conservative vehicles that would provide a lower rate of return in favor of protecting your principal. But with increased longevity, a retiree may need a more aggressive approach. With an investment horizon of perhaps 20 years or more, it may make sense to allocate a portion of the proceeds to growth opportunities. Consult a qualified financial professional to discuss your particular situation. He or she can work with you to address your specific needs and circumstances.

Something else to keep at the top of your mind should you experience a period of market losses at the time you're transitioning into retirement — while also withdrawing funds — is the sustainability of that portfolio and its ability to generate meaningful income in later years. To help safeguard future income, it's important to consider multiple strategies for the proceeds that will make your portfolio more resilient.

Family considerations

If you have a spouse, plan for him or her to live longer than you. Set aside a percentage of your sale proceeds that would remain untouched until your spouse needs it. You may want to consider life insurance for this role. (Related: How farmers use insurance to keep the homestead)

If you have children, you may have already accounted for them in estate planning or your business succession plan. If not, you may consider establishing a trust to transfer assets to the next generation. Consult your personal legal advisor to determine if a trust would be appropriate for your needs. You may also consider using a life insurance policy, with your children as named beneficiaries, to transfer assets to them after your death.

Learn to slow down

Once you sell the business and have your retirement funding in place, you’ll have to adjust to a very different lifestyle. You may be used to going 100 miles per hour every day as a business owner, so a dramatic slowdown in your daily activities can send a post-sale shock through your system. One way to lessen its impact is to learn to let go sooner.

As you approach retirement and the sale of the business, consider making changes in your day-to-day activities, such as delegating more. Use the time leading up to retirement to identify what you want to do after you sell the business and, as you get closer to the date you are retiring, increase your involvement in that activity or endeavor. Regardless of what you want to do with your retirement, it is important that you stay active with your family, friends, community and interests.

Discover more from MassMutual …

Calculator: Key employee loss

Tips for maximizing your retirement income

Knowing the value of your business

This article was originally published in July 2016. It has been updated.


1 United States Census Bureau, 2012 National Population Projections: Summary Tables, Table 2. Projections of the Population by Selected Age Groups and Sex for the United States: 2015 to 2060.

The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.