Hopefully all business owners enjoy the day when they can cash out on their hard work and spend time however they choose. If you’re fortunate enough to be in the position to sell your business for a nice lump sum, let’s make sure that money turns into sustainable income for your retirement. In the latest episode of the Money Wisdom podcast, Jake Doser, CFP®, CPWA® answers a question we received from a business owner who wants to know the best way to do that.

Jake breaks down the core principles of income planning, emphasizing the importance of balancing safety, growth, and liquidity in investments. He also touches on tax efficiency, budget planning, and the significance of understanding one’s financial needs and goals.

While this situation might seem unique, it mirrors a common challenge faced by many retirees: turning a large sum of money into a steady income stream. Whether it’s from a business sale or a substantial 401(k), the core issue remains the same—how to create a reliable income while ensuring the longevity of your assets.

So how do you invest this money? When we break down the three primary characteristics that every investment should ideally have, we’re focused on safety, growth, and liquidity. However, no single investment offers all three at once. The key is to diversify investments to balance these characteristics according to one’s financial needs and goals.

As you consider an appropriate investment strategy, start with a thorough understanding of current expenses and any financial dependents. For Gloria, this means assessing her monthly expenses, factoring in any income from Social Security, and identifying any financial dependents such as a spouse, children, or grandchildren. This helps determine the income gap that needs to be filled by her investments.

Another crucial aspect of planning is tax efficiency. We stress the importance of tax diversification, which involves strategically placing investments in various accounts to maximize tax benefits. This not only helps reduce the tax burden but also ensures that investments grow efficiently.

These are some of the key discussions that you should be having with a financial professional. By understanding and balancing the characteristics of investments, planning for current and future expenses, and ensuring tax efficiency, anyone can turn a lump sum into a reliable income stream for their retirement years.

Here’s some of what we discuss in this episode:

• The challenges facing business owners (or anyone) when they receive a big pile of money.

• Investment strategies should focus on three primary characteristics.

• What you need to consider before you build an investment strategy.

• How to be as tax-efficient as possible with your planning.