Retirement Questions to Ask

By Jason Watson, CPA
Posted Saturday, November 5, 2023

If financial planning is being skipped, then you need to boil things down a bit. There are three very simple questions that need to be asked and, in most cases, the last question is the most important.

Retirement Goals and Objectives

When do you want to retire? Will it be transition-style or cliff-style? Is it better to burn out than to fade away (Rock of Ages anyone?)? And then all the issues of how much and for how long.

What type of legacy do you want to leave behind for your heirs? Do you want the check to the mortician to bounce?

Investment Risk

The quintessential question for all financial planning is investment risk so retirement plans and products can be matched with the investor’s level of risk tolerance.

Show Me the Money

How much money can you give up temporarily? This is the most important question. This will single handedly dictate 401k versus SEP IRA versus IRA versus defined benefits pension versus whatever. Perhaps not single-handedly, but the amount of cash you can stomach separating from as a small business owner will be a compelling factor in your decision making.

For example, if only have $7,000 to spend, an IRA is all you might need assuming 2024 IRA contribution limits. Having said that, a solo 401k plan which also has a Roth option to it, might be better even if you only put in $7,000. More on that in a bit.

And as any small business owner will explain, most extra dollars are invested back into the business. This is a simple math equation- many small business owners believe in and perhaps even realize a larger return on investment with a dollar invested back into the business versus the stock market or real estate.

In many cases, a small business will be a huge source of retirement income either through residual income (such as an insurance agent or a financial advisor), shareholder or partnership income such as guaranteed payments, or from the sale of the business.

This might not be as true for the one-person consultant of course, but you get the idea of pressure between growth and retirement.