Can You Retire During a Pandemic?

It’s crunch time for business owners who deferred retirement during the last recession. The good news? With careful planning, retirement is possible now.
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By Kyle Francis

Will COVID-19 interrupt your retirement plans? Many business owners who were dreaming about retirement when the year began are in a holding pattern now. Some compare the pandemic-related downturn to the financial crisis of 2008-2009, which dashed the early retirement plans of many business owners. They wonder if the current situation will resemble that recession.

Kyle Francis

Kyle Francis

The jury is out because the economic fallout from the pandemic is still unfolding. But there’s good reason to believe 2020-2021 won’t follow the 2008-2009 playbook. Banks are still lending. Credit hasn’t seized up. Still, it’s crunch time for some business owners who deferred retirement 12 years ago. There simply isn’t enough career runway left to put retirement plans on hold for a decade-plus. The good news is you may not have to — with careful planning, you can still retire.

How quickly will your business recover?

If you’re hoping to retire in the short-term, your prospects will depend in part on how hard the pandemic hit your industry. This is one of the factors that make the current situation so unprecedented; so far, the pain is distributed more unevenly than in previous downturns, and multiple issues are in play. COVID-19 has taken a significant toll on businesses in some sectors, like hospitality, gyms, dine-in restaurants, nightclubs, theaters, etc.

If you’re in one of these sectors, you may be planning to hang in there as best you can until the situation changes, e.g., a safe, effective vaccine is widely distributed. Other sectors, like landscaping and construction, are bouncing back quicker. And many businesses in industries like healthcare, distribution and technology are thriving during the pandemic due to increased demand.

No one really knows what’s going to happen next, but there are reasons for optimism, like the recent announcement about progress on the vaccine front. On the other hand, there are signs that the economy will continue to be affected by the pandemic, such as rising cases in the U.S. Regardless, planning your next move starts with projecting when your business will recover, so your pandemic retirement plan should include your best estimate of a recovery timeline.

Make sure you have a plan in place for the first green shoots

Many hard-hit businesses in 2008 decided to just wait it out. Business owners slogged through a slow recovery, but too many didn’t take the crucial step of being ready to move fast once the economic situation shifted to more favorable conditions. If you’re planning to retire soon, don’t make that mistake; have a plan in place so you’re ready when the first green shoots appear.

Take a look at how your business is doing in terms of revenue, staffing levels, customer traffic, etc., and compare it to that of your peers in the industry. Consider getting a formal business valuation from a CPA, broker or business appraiser who’s familiar with your sector. You’ll need that information eventually if you plan to sell, and an accurate valuation can help you get a better idea of where you stand now and what your options are.

Knowing the true value of your business is essential for your personal retirement plan. Come up with a number you’ll need to retire comfortably, and keep that number in mind as you think about selling the business and monitor the commercial market. Calculate how long you can realistically wait for things to turn around after the pandemic.

Take advantage of the lull in business to get busy planning

If your business has been significantly impacted by the pandemic, use the free time you have on your hands to get your books in order and put a plan in place. Creating and executing on a plan has a power of its own — knowing where you stand and what is possible can help you stop worrying about things you can’t control and address the factors where you do have influence.

Consider your exit plan. Will you sell the business to the highest bidder? Is your plan to find a buyer who has a similar business approach to yours? Are you thinking about grooming an employee or someone else to take over? If that’s your plan, the sooner you can start making that happen, the better off you’ll be.

Also keep potential wildcards in mind. It’s possible that changes like the switch to remote working will affect the value of commercial property long after the pandemic ends. That’s relevant if you own your business property, but if you lease, it could also be a factor in your negotiation with a landlord. Tax rates are another possible wildcard. Taxes on corporate entities will almost certainly rise as the government looks for ways to offset pandemic relief spending.

If you could choose the business climate to sell your company and retire, you probably wouldn’t select a time when a pandemic is complicating decisions. But that doesn’t mean you can’t retire during a pandemic — you can. “Begin with the end in mind” is always good advice in retirement planning, no matter what business you’re in, so start planning now.

About the author: Kyle Francis

Kyle Francis is founder and CEO of Professional Transition Strategies, created to facilitate the sale of over 350 dental practices as a buyer’s representative, seller’s representative, or as a transaction broker.