Selling a home or business before retirement.
What you should know about SIS.
What could retirement look like with a structured installment settlement?
Retirement Reimagined
Most people entering retirement anticipate enjoying the freedom and flexibility it offers after decades of working.
Common imaginings and dreams about retirement include:
Relaxation
& Leisure
Spending time relaxing, pursuing hobbies, and traveling. Many dream of leisurely days on beaches or embarking on adventures around the world.
Time With Your Loved Ones
Strengthening bonds with loved ones, hosting gatherings, volunteering, babysitting grandkids, and reconnecting with old friends.
Pursuing Your Passions
Having the time to finally delve into long-ignored hobbies, learning new skills like cooking or playing a musical instrument, and exploring creative pursuits like writing or painting.
Travel & Adventure
Visiting exotic destinations, taking cruises, exploring new cultures, and experiencing adventures like safaris or scuba diving.
Financial Freedom
Being able to live comfortably without financial stress, having enough savings to pursue desires, and not worrying about outliving savings.
Simplifying
Life
Downsizing, moving to a new home or community that requires less maintenance, or creating a simpler lifestyle that frees up time and money for enjoyment.
How a SIS Can enable a
Comfortable Retirement
Mailbox Money
Receive payments over many years to supplement retirement or augment cash flow. SIS payments become steady "mailbox money" for sellers.
Neutralize Capital Gains
Neutralize Capital Gains - Allows the seller of a business or property to defer tax liability on the capital gains until the years in which the payments are actually received.
Grow Your Nest Egg
Grow Your Nest Egg - Your principal is invested and grows in value plus earns interest over many years. Fixed or variable payment options are available, fitting any risk appetite.
Payment Security
Insurance companies are regulated and have strong credit ratings, demonstrating their ability to safely meet future financial obligations.
Flexibility on Payments
The seller may decide to receive only a portion of the sale through guaranteed future payments and the remaining amount in a lump sum.
Have Peace of Mind
Sellers will find peace of mind and a guarantee that future obligations will be honored, eliminating the need to worry about being paid.
Pros & Cons
Structured Installment Sales for Funding Retirement
Structured installment sales offer a compelling option for retirees seeking tax deferral, guaranteed income, and financial security in retirement. However, careful consideration of the complexities and potential drawbacks, with the guidance of qualified professionals, is crucial before implementing such a strategy.
Pros
Tax Deferral
SIS allows retirees to defer capital gains taxes by spreading the recognition of income over a period of years, potentially reducing their overall tax burden.
Guaranteed Income Stream
The sale proceeds are converted into a stream of guaranteed payments, often backed by a highly rated life insurance company, providing predictable and reliable income for retirement, independent of market fluctuations.
Financial Security
This guaranteed income stream offers retirees peace of mind and simplifies long-term financial planning.
Customization
Payments can be customized to align with individual financial goals, like regular income streams or lump sums at specific times.
Estate Planning Benefits
SIS can be integrated into estate plans, potentially enabling heirs to inherit income streams rather than a lump sum.
Cons
Complexity
SIS can be intricate and may require professional guidance from tax advisors and financial professionals to ensure proper structuring and IRS compliance.
Lack of Liquidity
While the payments are reliable, sellers cannot access the funds outside of the predetermined schedule, potentially limiting access to larger sums for unexpected needs.
Limited Buyer Pool
The requirement for the buyer to pay the full amount upfront (rather than over time) might limit the pool of potential buyers compared to a traditional installment sale.
Potential Default Risk
While the risk is mitigated by using a highly-rated insurance company, the possibility of buyer default on future payments still exists in a traditional installment sale.
Interest Rate Risk
If interest rates rise during the payment term, the seller may receive a lower interest rate than the current market rate, potentially leading to lost income.
Retirees overall view structured installment sales (SIS) favorably as a strategy for selling appreciated assets (like businesses or real estate) due to the value of potential benefits.
Dudek Kelly emphasizes the importance of thorough analysis, including potential downsides,
and the need to work with qualified professionals to ensure proper structuring and compliance.
Access Qualified SIS Advisors
Trusted Advisor Network
Utilize the Dudek Kelly Trusted Advisor Network of Qualified SIS Experts
Dudek Kelly works with several Trusted Advisors that help clients navigate the process of selling a home or business using Structured Installment Sales. We offer qualified Financial Advisors, CPAs, Attorneys, M&A Advisors and Real Estate agents. Accessing The Trusted Advisor Network is free to clients.
Access Qualified SIS Advisors
Trusted Advisor Network
Utilize the Dudek Kelly Trusted Advisor Network of Qualified SIS Experts
Dudek Kelly works with several Trusted Advisors that help clients navigate the process of selling a home or business using Structured Installment Sales. We offer qualified Financial Advisors, CPAs, Attorneys, M&A Advisors and Real Estate agents. Accessing The Trusted Advisor Network is free to clients.