Mary came from humble beginnings and learned early on the value of hard work. Putting her strong work ethic to use, she started her own professional services company right out of college. Mary grew the business into a small, successful company that provided her a very comfortable living. She married later in life, had kids and eventually divorced.
With neither of her kids interested in joining the business and no clear heir apparent on her management team, Mary continued to run the company herself. But as her retirement grew closer, she began to wonder what the right exit strategy might be. She had not taken steps to formally evaluate or plan her financial future but did have some money put away to complement the eventual sale of her life’s work: the business.
After initial discussions with her staff about her future retirement, a group of employees came back and expressed interest in buying the business from her. Mary was thrilled with the prospects of her business carrying on, and her current staff were just the people for the job. After a professional valuation – which came back lower than she anticipated – and further discussion, they agreed to terms of the sale and a plan to transition the business over the course of the next three years. Mary felt comfortable with the amount of cash she would receive as a part of the transaction and assumed she could live comfortably in retirement.
The transition went well and by the time she turned 66, Mary was fully retired. She had been able to save some of the money from the sale and invested it with a friend’s son. She focused her energy on spending time with grandkids and traveling with friends, loving life.
What could go wrong?
A few years later, after seeing some headlines about a drop in the stock market, she called her financial advisor who reassured her about safety of her money but mentioned that he was slightly concerned with the number of withdrawals she had taken over the last year. Unsettled, she reached out to another friend who encouraged her to go through a financial planning process. Unfortunately, the results were not what she had hoped or expected. Based on her current lifestyle, she would run out of money in 10 years, just shy of turning 80. She was in great health and planned to live much longer. She could not believe that despite selling her company for $2 million that she was not financially healthy for the rest of her life.
After coming to terms with her new reality, Mary put together a plan to make the money last – both by cutting back on expenses and bringing in more income. She started doing some contract work for her old company, sold her house and started living a much more modest lifestyle. Retirement turned out not to be as carefree as she had once dreamt.