Sunday, September 25, 2011

A Retirement Lesson for Those of All Ages

I’ve heard many retirement stories as of late. Most of them are disastrous tails that leave me feeling either sad for the people involved because they were affected by forces outside their control or mad because these people failed to take advantage of situations that could have set them up securely for the entirety of their retirement years.

The following story involves people who are close to me, and it leaves me with mixed emotions. Part of me is angry about the wasted opportunity they had presented to them, and the other part of me is saddened by the outlook for their retirement future.

A Sad Moment
The story I’m about to tell you, involves a close family friend, whose small business was started several generations ago by his father. It was built into a thriving operation by the son of the founder and his brother during the several decades following the father’s passing.

Half of the business was held by the two brothers, the other half by their mother until her death in 2005. Both son’s were devastated by the loss of what was a strong woman who had largely held the family together even before the passing of their father. It was a tough moment for the entire family to bear.

Sunshine after the Rain
The passing of the mother left the two sons -- who were now in their early and mid-50s -- with a wonderful opportunity though. Not only did the two now inherit the entirety of the family business, but they were also left with a sizeable inheritance and their childhood home, which was to be sold entirely for profit.

This meant that the two men had a golden opportunity before them. The home was sold for well over $200,000, and while I don’t know the specifics of the estate settlement, each son should likely have received a sizeable amount of cash, plus an additional 25% of the family business.

The first son took his money and began planning to leave the business to enjoy his retirement. The second son, rather than taking the loot, putting the business up for sale, and heading for what should have been a cushy retirement, instead decided to continue working in hopes of helping one of his own sons learn and eventually take over the operation.

A Missed Opportunity
With the second son’s continued work in the family business, his portion of the inheritance went fast. There was a sizeable chunk that when into the business itself. There was a new car for the wife. There was a wedding for the daughter and out-of-state tuition for five years of college at a Big 10 university for another son.

But things were looking bright for the business. It was paying a sizeable salary to both father and son. The son was learning the ins and outs of the operation, and a grandson was on the way.

Then “The Great Recession” Hit
As the economy began to falter and stagnate, so did the business. Similar businesses began to fail. The father started combating several health issues, and business levels slowed just as retirement age began to near. Nothing had been saved in the way of retirement. There was no pension. The wife, a school teacher, wasn’t making a sizeable income and hadn’t put much away in the way of retirement savings. Debt began to take over and the father stopped taking a salary in order to continue paying his son.

This left little in the way of retirement hope anywhere in the couple’s immediate future. The business is still operating, but output is low and the father has been paying his son in lieu of himself for nearly a year. What was a wonderful retirement opportunity was wasted due to the mindset that things were good and would stay that way, rather than hoping for the best but preparing for the worst.

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