CPA INSIDER

How to know if retirement is right for you

CPAs explain key factors to consider when moving to life’s next chapter.
By Teri Saylor

The calendar says it may be time to retire, but how do you know if you are emotionally ready to take that step?

The decision to retire is intensely personal, according to Michael Goodman, CPA/PFS, president and principal of Wealthstream Advisors Inc. of New York City, who often counsels individuals on their retirement plans.

"Some of my clients are ready to retire as soon as possible. Others have no interest in retiring," he said. "I always encourage them to keep working as long as they want to."

CPAs eventually face the same challenge as the one they advise clients on — and there are lots of things to consider when deciding if it's time to stop working. Many CPAs have an emotional attachment to their careers. They enjoy their colleagues. If they own their firms, they may worry about what will happen to their employees and clients when they retire. They may feel their identities are wrapped up in work, or they may not know what they will do with their extra time. Or there may not be enough money saved to live the life they want in retirement.

Goodman, along with Jim Sullivan, CPA/PFS, in Wheaton, Ill., and Steve Ellard, CPA, owner of a firm in Brewster, Mass., provided tips on how to recognize when it's time to retire and how to do so with peace of mind.

Gauge whether you can afford to retire. Life expectancy is on the rise, and you must make sure you have saved enough money to sustain you into old age. According to the Social Security Administration, men and women turning 65 now can expect to live well into their 80s, and a quarter of them will live past 90. "I advise clients to save enough money to carry them through age 100," Goodman said. "Today, you could be retired and unemployed for 30 to 40 years."

Evaluate your life goals. Are you ready to embrace retirement, move into a new chapter of your life, and become involved in activities such as volunteering? Or do you want to remain in the workplace and take a part-time job or even forge a new career? Goodman said he once had a client who was a successful salesman, retired at 60, and then worked in his dream job as an EMT for 10 more years.

Reflect on your passion for the work. Ellard suggested examining your passion for working and helping others. "When you lose that passion, it may be time to do something else," he said. Making a change might be good for you. It could restore your passion and invigorate you, he added.

Examine your health. To be diagnosed with a debilitating or terminal illness is an awful scenario. Sullivan works with clients through his company, MedicareAware, who may have illnesses such as Parkinson's and Alzheimer's, which eventually force them to retire. "It would be nice if we could all pick the time and date for retirement, but sometimes your retirement has more to do with your health and cognitive ability than your typical retirement age," he said. He advised CPAs to develop a strategy for their practice in the event they become incapacitated. "Be open to testing if your spouse, employees, or partners notice you are starting to slip," he added.

Have a succession plan. CPAs may hesitate to retire out of worry or fear of leaving their employees and clients stranded. A succession plan will help give you peace of mind about retirement and leave you looking forward to it instead of dreading it. A strong plan may save your firm if you become disabled from illness or an accident, according to Sullivan. "When you put your succession plan in place, be prepared to discuss it if your clients ask you about it. This will give you and your clients peace of mind," he said.

Ellard suggested starting your career with the end in mind and begin planning for retirement from day one. "For me, that led to offering add-on services, including product services and payroll services," he said. The add-on services brought in additional revenue and they position the firm better for when Ellard is prepared to sell it. For CPAs serving individual clients, formalizing tax and advisory services can increase firm value and meet changing client needs and expectations.

Prepare your staff and adjust client expectations. If you are a senior accountant or a sole proprietor with junior or staff accountants who report to you, give them more responsibility, particularly when it comes to servicing clients. "I have a talented staff, and the firm is about the whole team, and my goal is to de-emphasize myself, so the firm will not be hit with a huge negative impact or lose clients when I transition out," Ellard said.

Be flexible. If you are highly productive, motivated, and moving forward, there may be no reason to retire. But an opportunity could arise suddenly, according to Ellard. Be flexible and keep in mind a picture of what your retirement might look like. "Come up with an amount of money you would be willing to accept if someone ever offers to buy your firm, and be ready, because you never know when that might happen," he said.

Examine what is most important to you and your business. Setting priorities can put you in the right frame of mind to retire, and a good place to start is by considering the most important aspect of your business, according to Goodman. "Is it caring for your clients? Making the maximum amount of money off the business whether you stay in it or decide to sell? Maintaining the legacy of your firm?" he said.

When you determine your priorities, Goodman added, you can create a pathway to accomplish your goals and look forward to your retirement.

Teri Saylor is a freelance writer based in North Carolina. To comment on this article or to suggest an idea for another article, contact Chris Baysden, JofA associate director, at Chris.Baysden@aicpa-cima.com.

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