Some 12 million baby boomers own their own businesses — and 70 percent of them will be retiring over the next couple decades. Estimates of the total wealth locked up in these companies run in the trillions of dollars.

But most small business owners are relying on a very illiquid asset for retirement security—the value of their companies. Making that asset liquid isn’t easy, says John Leonetti, CEO of Pinnacle Equity Solutions.  Leonetti trains financial advisers to work more effectively with clients who are small business owners, focusing on exit and retirement strategies.

“For most small business owners, 80 or 90 percent of their personal wealth is tied up in a privately-held, illiquid business” he says. “Most of them don’t know how to take that asset and turn it into cash they can use to support themselves in retirement. And they don’t even know what they don’t know about it.”

Small business owners can access a range of qualified retirement account options specially suited for them. But Leonetti finds that those accounts usually are dwarfed by the value of the business itself. “They might have $200,000 or $300,000 in an IRA, but the business might be worth $5 to $10 million.”

Learn more about the retirement planning challenges facing small business owners in my column this month at WealthManagement.com.

Tags | small business