Nov 17, 2017

Planning for Retirement – A CPA’s Personal Perspective

James AndersonBy James S. Anderson, CPA

MoneyLife100On June 14, 1976, I walked into the offices of Campbell Rappold & Yurasits for my first day of work. Where on earth have the last 41 years gone? I can’t possibly be old enough to contemplate retirement, but the calendar doesn’t lie. That time is not only coming, but it is here. So, let me share some thoughts and advice on this transformation we all eventually will face. While my perspective is shaped by the environment of a midsized local accounting firm, I believe the processes I will discuss can be applied to any small business.

Business Hand OverIf you are an owner, part owner, or partner in a business, perhaps the single most important step is to have a succession plan in place. How will the business continue to operate when key employees or owners retire? The simple answer is to identify individuals within the company who can best step into leadership roles. You should be training and developing these individuals as top-tier personnel approach retirement age. There are two vital factors that go into this. One: the person contemplating retirement must be willing to “let go.” Approaching retirees have to set aside the ego and allow others the opportunity to learn and grow. Two: implement processes that will keep these individuals in the organization. In a competitive environment, we must take steps to ensure our star employees know there are opportunities for advancement. Our firm has always had a mandatory phaseout policy for our partners. When I started in 1976, three of the partners were ancient – in their late 40s! With the mandatory phaseout clause in the partnership agreement, I knew there would be opportunities for me if I excelled in my career. I am now in my phaseout, which opens opportunities for those who started with the firm when I was only “ancient.” I believe this is an important part of the success we have experienced with employee retention.

From the individual’s perspective, retirement is a topic each of us must wrestle with personally. Sometimes it is an event that we have no control over. For example, most large accounting firms have a mandatory retirement age at which time the individual must leave. Whether that person seeks other employment opportunities is obviously a personal decision. Many of us in the professional services field have a unique opportunity to exert some control over how we retire. That is, we can walk away completely, or we can cut back on our responsibilities gradually. In our firm, the mandatory phaseout provision only applies to profit-sharing ownership. A partner who has completely phased out may continue to work and get compensated for what he or she is able to bill. This provides flexibility to work as much or as little as they choose. Personally, I have decided that I will not continue to work in the firm when my phaseout is done. In fact, I have decided to exit sooner than necessary. I have begun a three-year process of transitioning my clients to other people in the firm. This has the dual benefit of allowing me to “ease into” retirement as well as allowing my clients to begin working with new people while I am still around to assist in the transition. As I enter the second year of this plan, I believe it is working well for both me and the firm. I am working less and experiencing a taste of what retirement will look like, and the firm is maintaining client relationships.

This is obviously not an opportunity available to all. As a CPA, I have helped many of my clients navigate the retirement process, and was able to apply my experiences with them to my own circumstances. I would encourage anyone who does not have this type of background to bring a CPA into the picture sooner rather than later. A CPA will prove to be a tremendous asset for both you and your business.

James S. Anderson, CPA, is a partner at Campbell Rappold & Yurasits LLP in Allentown, Pa.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.
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