Many people think tax planning is only needed before filing their taxes in April. However, this couldn’t be further from the truth, especially if you’ve been surprised by a large tax bill in April. Strategic decisions throughout the year can make a real difference in how much after-tax income remains in your pocket.

Here are some tax-planning tactics you can use throughout the year:

Tactic 1: Leverage Retirement Contributions

Business owners have more options than traditional employees regarding retirement savings, and those options can double as tax-reduction tools. 

Solo 401(k): Depending on your business structure and income level, you could consider a Solo 401(k) if you’re self-employed with no full-time employees (other than a spouse). These plans allow for employer and employee contributions, meaning you can contribute well over $60,000 annually, depending on your age and taxable income.

SEP IRA: A SEP IRA is another popular option for those with few or no employees. For the 2025 tax year, the SEP IRA contribution limit is the lesser of:

• 25% of the eligible compensation, or
• $70,000

Defined Benefits Plan: A defined benefit plan might be worth exploring if you want to accelerate retirement savings further. For 2025, the maximum annual benefit a defined benefit plan can provide is $280,000, or 100% of your average compensation for the highest three consecutive years, whichever is less.

In other words, if your average income during your top three years is $250,000, your benefit can’t exceed that amount, even though the cap allows up to $280,000.

These limits are set by IRS Section 415(b)(1)(A), and are an increase from 2024’s $275,000 threshold.

These retirement plans prepare you for the future and reduce your taxable income, making them a powerful tool for tax planning strategies. To make the most of them, coordinate with your Buffalo Grove financial advisor and CPA to select the right plan and funding strategy for your circumstances, goals, and timelines.

Watch our co-founder, Steve Lewit, discuss the impact of borrowing against your 401(k) on WGN9 News.

Tactic 2: Track Business Expenses Diligently

One of the most overlooked ways to keep more of your earnings is by fully capturing all of your legitimate business expenses. This isn’t just about saving receipts or online records; it’s about building a proactive system for tracking, categorizing, and reviewing your expenses throughout the year.

Common deductible expenses include business travel, client meals, office supplies, equipment, marketing costs, software subscriptions, and even part of your home office. But these deductions can get tricky. For instance, a business dinner with a prospective client is often deductible, but a lunch with a personal relationship is not.

That’s why working with tax planning professionals in Buffalo Grove who can help you avoid gray areas and stay compliant is crucial. Done right, tracking expenses isn’t just a year-end chore; it’s a way to reduce your tax burden and increase your overall net profitability year after year.

It’s a common mindset among entrepreneurs: “My business is my retirement plan.” And on the surface, it makes sense. You’ve spent years building something valuable, so selling the business or drawing income from it feels like a natural exit strategy.

But relying solely on your business to fund retirement comes with some hidden risks. Markets shift. Industries change. Government regulations evolve. Buyers may not be as enthusiastic or well-capitalized as you hoped. And if your business’s value is tied closely to you, your expertise, relationships, or day-to-day involvement, it may be harder to sell or transfer than expected.

Even if things go according to plan, business sales don’t always generate the windfall people expect. Taxes, deal structure, and payment terms (such as earn-outs or seller financing) can all affect how much money ends up in your pocket, and when.

The smarter approach?

View your business as part of your retirement plan, but not the only part. 

Tactic 1: Diversify Outside the Business

If your personal net worth is primarily tied to your business, you’re more exposed than you may think. While it’s natural to reinvest profits into growth, overconcentration in a single asset, especially one tied to your time, energy, and industry conditions, can create unnecessary retirement risk.

Start by intentionally directing a portion of your profits into personal investments that operate independently from your company. That could include:

• Retirement plans like a SEP IRA, Solo 401(k), or a defined benefit plan
• Taxable investment accounts for long-term, flexible investing
• Income-producing real estate to create alternative revenue streams
• Cash reserves to help smooth out other, more volatile sources of income
  

The goal isn’t to stop investing in your business. It’s to build a second engine of wealth that gives you more options when it’s time to retire, especially if market conditions or buyer demand aren’t ideal when you want to exit.

Tactic 2: Stress-Test Business Reliance

Hope is not a retirement plan, and neither is assuming your business will sell for the number you have in mind. That’s why running realistic scenarios is essential to see how your retirement would hold up under different market and exit conditions.

Ask yourself:

• What if I had to sell during a recession or industry downturn?
• What if the sale included a multi-year earn-out, seller financing, or delayed payouts?
• What happens if I want to retire sooner than planned due to health or family reasons?
  

A Buffalo Grove fiduciary financial advisor can help model best-case, mid-range, and worst-case outcomes using retirement planning tools and strategies. 

These projections factor in different variables, like investment returns, inflation, lifestyle spending, and business sale outcomes, to help you see where you’re well-positioned and where you may need adjustments.

If your retirement hinges entirely on a smooth, high-dollar sale of your business, you may be vulnerable. Stress-testing gives you a clear view of how resilient your plan is, and what steps you can take to strengthen it.

You may think you know what your business is worth, but until it’s valued professionally, that number is just a guess.

Most business owners have a rough idea of their company’s worth. But without a formal, professional valuation, that number is often based on gut feeling, revenue multiples, or comparisons with peers, none of which reflect the whole picture.

Here’s why that matters: if your business is a significant part of your retirement strategy, then your net worth, income projections, and exit plan are all tied to its value. And if that value is off, by a little or a lot, it could create a ripple effect across your retirement timeline, lifestyle expectations, and estate plan.

Tactic 1: Get a Formal Valuation Every Few Years

Regular business valuations give you a more accurate picture of your net worth. It also helps with tax planning, succession strategies, and future sale negotiations.

A professional valuation gives you a more objective, data-driven number based on cash flow, market conditions, industry trends, and the specifics of your company’s structure, client base, and operations. It also:

• Helps you assess if you’re on track to meet your retirement goals
• Provides clarity when considering a sale, merger, or internal succession
• Strengthens your negotiating position with potential buyers
• Informs your tax planning and gifting strategies (especially for family transitions)
  

Tactic 2: Align Business Value with Retirement Goals

If your retirement plan depends on the business selling for $3 million, but it’s currently valued at $1.8 million, you’ve got work to do. A valuation gives you a concrete target and a timeline to improve the business’s worth if needed.

As a business owner, having a comprehensive succession plan is critical for the sustainability of what you’ve worked hard to build over the years. Whether you’re handing the business to a family member or selling it to an outside buyer, a business succession plan can assist in preserving the value you’ve built, protecting your employees and clients, and setting up your next chapter with clarity.

Here are two foundational tactics every business owner should consider:

Tactic 1: Start the Process Early

Succession planning isn’t something you cram into your final year. It often takes five to ten years to do it right.

Why start early?

• You’ll have time to identify and groom the right person, whether that’s a family member, key employee, or outside buyer.
  
• To improve your company’s marketability and valuation, you can ensure your bookkeeping is in order, streamline operations, and make strategic hires.
  
• Relationships with clients, vendors, and staff don’t transfer overnight. It takes time to build trust between your successor and your stakeholders.
  
• The earlier you start, the more strategic you can be with taxes, retirement income, and estate considerations.
  

Steps to take now:

• Clarify your personal retirement timeline and goals
• Evaluate internal talent or external buyer options
• Begin delegating decision-making authority in phases
• Document operational procedures to reduce reliance on you

Tactic 2: Put Agreements in Writing

Too many transitions fall apart due to handshake deals or vague expectations. A strong succession plan includes legal and financial agreements to protect all parties. Writing the plan brings discipline to the process and gives everyone involved peace of mind about how the transition will unfold.

Key documents may include:

• Buy-sell agreement: This outlines what happens if an owner retires, dies, becomes disabled, or wants to sell their stake. It sets valuation methods, funding mechanisms (often life insurance), and terms of the sale.
  
• Operating or partnership agreement: If you have co-owners or partners, this document should reflect the succession terms and responsibilities.
  
• Family transition plan: Clarity is critical if you pass the business to children. Will they buy in over time? Will siblings be involved? Will others be bought out?
  

Work with the right professionals:

• A Buffalo Grove financial advisor can help model cash flow, tax implications, and retirement income.
  
• An estate planning attorney can align the plan with your will, trusts, or gifting strategy.
  
• A business attorney will draft or update the legal documents to reduce risk and set proper expectations.

Retirement can be a significant adjustment for business owners. When your schedule, purpose, and identity have all been wrapped up in running a company, stepping away isn’t just a financial transition; it’s an emotional one, too. 

Shifting from 60-hour workweeks to unstructured days can feel freeing, disorienting, or both. So how do business owners make the switch successfully?

Here are two tactics to consider as you plan your transition from business owner to retirement: 

Tactic 1: Create a Personal Retirement Budget

When business income stops, your spending habits won’t automatically slow down. That’s why a detailed personal budget is a must. Start by estimating your fixed expenses, such as housing, insurance, and utilities, and then layer in the lifestyle goals that make retirement enjoyable: travel, hobbies, entertainment, and family support.

Don’t forget to factor in:

• Rising healthcare costs
• Long-term care planning
• Inflation
• One-time purchases or big-ticket items (e.g., a new car, home renovations, or a dream trip)

Also, consider how your income will be structured—Social Security, investment withdrawals, rental income, or proceeds from the sale of your business. The goal is to match reliable income sources with ongoing expenses so you can retire with confidence and flexibility.

Tactic 2: Explore New Purpose-Driven Roles

Retirement doesn’t mean losing your sense of purpose; it just means redefining it. Many former business owners feel restless without an apparent reason to get out of bed in the morning. That’s why it’s essential to think ahead about how you want to spend your time once you step away from daily operations.

Some rewarding options include:

• Mentoring or advising younger entrepreneurs or local startups
• Volunteering with organizations that align with your values
• Teaching or guest lecturing at a local college or business school
• Joining nonprofit boards where your experience can make an impact

Filling your calendar with meaningful activities can help ease the emotional transition, keep you mentally sharp, and maintain a strong sense of contribution—without the pressures of ownership.

When your financial world includes personal and business complexity, objective guidance matters.

Tactic 1: Hire an Advisor Who Works in Your Best Interest

Fiduciary financial advisors are legally obligated to act in your best interest. That’s different from brokers who may be incentivized to sell certain products. At SGL Financial, we take a fiduciary approach that prioritizes your complete financial picture.

Tactic 2: Find an Advisor Who Understands Business Owner Needs

Look for a financial advisor who understands the unique challenges of balancing payroll, taxes, growth, and exit planning. Someone who will ask the right questions, not just about your portfolio, but about your plans for the business and beyond.

If you’re a business owner looking for the services of a fiduciary financial planner, connect with us today.