It's always good to have an exit strategy from your fishing business, regardless of what stage your business is in. An exit strategy for a mature business is different from a new entrant or growing operation where an operator may need to think about worst-case scenarios with lots of debt. Therefore, retirement planning for self-employed, family-run businesses has unique challenges.
Things to consider when planning your exit
Think about your financial needs in retirement, the financial health of your fishing operation and your willingness to let go of a business you have likely built from the ground up. All business transfers require pre-planning and engaging any partners (i.e. family member, crew) in the process early.
You may want to pass your entire business on to a targeted buyer if you want to keep the business within your family or community. On the other hand, not everyone will sell or transfer their business as a whole, and will instead sell off parts of it. However you plan to divest, there will always be capital gains to consider.
It is critical to have an understanding of corporation or partnership structures, how and when to strategically gift your fishing assets, and the tax implications of all transfer strategies. These topics and more are covered in the Alaska Sea Grant publication "How to Make a Directed Transfer of Your Fishing Business" (below).
There are several seller-financing options if you have a targeted buyer. Self-financing your intended buyer or family member over an extended period of time can help ease your tax burden.
Another mechanism would be using a third-party to oversee long-term payments by using an escrow service or a participation loan such as outlined in the presentation on participation loans (below).
Will your boat and permits remain in your family or community after you retire? The amount of capital required to enter the fishing business has increased, decreasing the likelihood that a new fishermen will be able to buy your business in one transaction. With forethought, however, you can still pass all or most of your business assets to a person or group in a “directed transfer.”
This publication introduces established fishermen to the subject of retiring from fishing, discusses transfer strategies and examines tax/retirement implications. By encouraging established fishermen to pass on their business skills, this book also helps foster the next generation of Alaska fishermen.
Participation loans are provided to borrowers by both the seller and a bank, with the seller acting as a kind of “guarantee” on loans that would otherwise be out of a buyer’s reach financially.
This presentation provides introductory information on these types of loans. Contact your lender for details.
In this podcast, Alaska Sea Grant business specialist Glenn Haight and financial planner Randy Hurtte from Juneau, AK, cover methods of investing including stocks, bonds, as well as mutual and retirement funds. (45 minutes)
In this podcast, Glenn Haight reviews considerations in planning fishing business transfers and retirement with Sunny Rice, Alaska Sea Grant, Petersburg, AK; Randy Hurtte, Stellar Financial Services, Juneau, AK; and Dave Baker, Iowa State University Extension Beginning Farmer Program, Urbandale, IA. (1 hour 47 minutes)
Use this Excel calculator to help you determine how much the money you invest today will be worth in 20 years, given varying inflation rates, interest rates, beginning principal, etc. Use it in conjunction with the “Investing for Retirement” podcast on this website (minutes 10:45-16:15).