Integrating Retirement Planning Across Succession Phases
In Part 1, we looked at how retirement planning strengthens the core pillars of a CPA firm’s succession strategy, from retaining key staff to easing buyouts and managing liquidity. Today, we’re taking the next step: walking through each phase of a real-world succession—Preparation, Transition, and Post-Transition—and showing how retirement plans support the process from start to finish. When these timelines work together, your exit becomes clearer, smoother, and far more financially resilient.
Preparation Phase (5–10 Years Out): Laying the Groundwork
Preparation is often the most meaningful stretch of the entire process. These years give you the runway to organize your financial picture, clarify your goals, and set up a clean path for a future transition. The big priorities here are choosing the right retirement plan, putting real dollars into it, and making sure your planning supports the type of exit you want.
Preparation Phase: Building the 5–10 Year Runway
Review & Assess
Clarify goals and examine current plan capabilities (SEP/SIMPLE vs. 401k).
Accelerate Savings
Maximize contributions. Consider Defined Benefit plans for peak profits.
Align Team & Docs
Adjust vesting schedules. Update Buy-Sell agreements and insurance.
Positioned for Exit
Foundation laid for a smooth transition on your own terms.
Boosting retirement savings
Start by reviewing your current plan, or put one in place if you’ve never adopted one. Small firms have several workable choices—401(k), SEP IRA, SIMPLE IRA—with different levels of flexibility. If you want to dramatically accelerate savings and your practice generates strong profits, a Defined Benefit or Cash Balance Plan can make a sizable difference. These plans allow far larger deductible contributions than SEP IRAs or 401(k)s, sometimes reaching multiple hundreds of thousands of dollars per year for late-career CPAs. With the right design, catch-up savings become a powerful tax tool: you lower taxable income during peak-earning years and build a meaningful personal nest egg that reduces pressure on the eventual sale of your firm.
If that level of commitment feels too heavy or your profits vary, a 401(k) with profit-sharing offers flexibility. Aim to fully fund your deferrals and catch-ups if you’re over 50. In 2025, the employee deferral limit is $23,500 and total contribution limits reach about $70,000. In 2026, those rise to a $24,500 deferral limit and roughly $72,000 in total contributions. Catch-ups remain available for those 50 and older, including the larger “super” catch-up for ages 60–63 if the plan allows it. If your spouse works in the practice, including them in the plan can almost double your family’s annual contributions.
Aligning employees with your timeline
This is also a good time to quietly prepare your team. You don’t need to announce a retirement date, but you can start developing a successor or shifting responsibilities to senior staff. You might introduce deferred compensation or other executive benefits to encourage long-term commitment. Review your vesting schedule too. A graded schedule (up to six years) can motivate key employees to stay through the transition period—just be sure you’re compliant and transparent when updating plan terms.
Succession documents and funding
Use this phase to tighten the legal and financial structure of your eventual exit. Draft or update your buy-sell agreement, and think through how the transaction will be funded. An outside sale brings a lump sum or structured payments that must be coordinated with your retirement distributions. An internal sale may mean installment payments over several years, which you can balance against IRA or 401(k) withdrawals to stay in favorable tax brackets. Review insurance as well. Life or disability coverage can protect the agreement, and any existing policies—especially cash value contracts—should be integrated into your retirement strategy.
In short, this phase is about building the foundation: the right plan, the right savings trajectory, the right documents, and the right people. By the end of it, you want to feel confident that you can step away on your own terms and that the firm is positioned to thrive without you.
Transition Phase (The Handover)
The transition phase is when you formally hand over control of your practice. For some CPAs it’s a quick handoff, and for others it’s a year or two of reduced hours and mentoring. Either way, both your business and personal finances shift, and the work you did in the preparation years starts doing its job.
Transition Phase: The Seamless Handover
Exiting CPA Owner
- Begin structured sale income
- Phased or lump-sum plan withdrawals
- Delay Social Security strategically
- Shift focus to personal income plan
Successor / Buyer
- Assume practice leadership
- Maintain staff plan continuity (401k)
- Integrate client relationships
- Build their own retirement foundation
Maintaining continuity
Your focus here is stability. As you announce your exit and introduce new leadership, reassure staff that core benefits—401(k), health insurance, and other protections—continue without interruption. Even if a larger firm eventually merges your plan into theirs, balances and contributions typically carry over smoothly. Keeping the retirement plan consistent helps settle nerves during a period of big change.
Executing financial transactions
Your sale proceeds and your retirement income strategy now begin working together. A lump sum might serve as short-term cash while your 401(k)/IRA stays invested for later years. Structured payments can pair with modest IRA withdrawals to avoid pushing you into higher tax brackets. Many retiring CPAs choose to delay Social Security until sale income tapers off, which can improve long-term benefits and reduce taxation.
If you’re handing the practice to a junior partner and staying on part-time, you may remain eligible for the company plan. That extra year or two of contributions can meaningfully add to your savings, as long as your employment status still fits plan rules. A phased exit also allows small, controlled IRA withdrawals instead of one big shift in income.
Handling the official transfer
If the buyer keeps your 401(k), sponsorship transfers to them. If not, the plan may need to be terminated at closing, with balances rolled into IRAs or the new employer’s plan. When timed and communicated properly, this is usually straightforward. If the sale creates a low-income window—say you retire mid-year and installment payments haven’t begun—2025 or 2026 might offer a good opportunity for Roth conversions.
Keep plan details updated throughout the transition, including beneficiaries. If you’re approaching RMD age (73 in 2025 and 2026), determine whether continued part-time work allows you to delay RMDs from the workplace plan until you fully retire. Once assets move to an IRA, standard RMD rules apply.
A clear, steady transition keeps clients comfortable, employees confident, and your own retirement income aligned with the timing of your exit.
Post-Transition Phase (Retirement and Beyond): New Beginnings
Congratulations, you’ve handed over the keys and stepped into life after owning a CPA firm. This stage is your real retirement, yet your connection to the practice may continue. You might still care about how the firm performs if you receive payments over time or left your name on the door. You also still care about how your retirement assets behave. The goal now is to protect what you’ve built and enjoy it without unwanted surprises.
The Firm's Legacy (For Business)
Your New Beginning (For Personal Retirement)
For the business (your former firm)
New owners or partners are now running the firm and making decisions about its retirement plan. With some luck and a bit of earlier influence from you, they keep the program strong. They may ask for input now and then, especially if you agreed to serve as an emeritus advisor for a short period. A reassuring sign of a good transition is watching your former employees continue to grow, serve clients, and build their own retirement savings. It shows the structure you built is still working.
Your role at this point is simple. Receive any scheduled payments if the sale included them, or follow through on obligations if you kept a small ownership stake. Avoid stepping in on day-to-day matters. New leadership needs space to lead. Still, it feels good to know the retirement plan you established is still supporting the team.
If you receive installment payments or an earn-out, coordinate those with your withdrawal plan. A year with higher income from the sale may be a good year to pull less from your IRA. Work with your financial planner or tax advisor to decide which accounts to draw from now that the firm is no longer your active income source but may still send payments your way.
For your personal retirement
This is where your retirement plan fulfills its purpose. Because you aligned it with your succession planning, you should be in a strong position. Ongoing management still matters. Aim for a steady withdrawal rate that fits your long-term plan. If your defined benefit plan was rolled into an IRA, manage it as you would any other rollover account. If you receive buyout annuity payments or other sale proceeds, treat them as a reliable income stream.
Stay aware of sequence-of-returns risk during your early retirement years. A market downturn at the beginning of retirement can drain assets faster than expected. Cash reserves from the sale or low-risk funds can help you avoid selling investments during a downturn. If markets fall, you might rely on cash for a year and reduce withdrawals from your 401(k) or IRA to give your portfolio time to recover.
This stage is also a natural point to update your estate plan. Your business may have been a large part of your net worth, and now that value lives on as financial assets. Review your will, trusts, and beneficiary designations. If you hold promissory notes from the sale, make sure they are reflected in your estate documents so your spouse or heirs receive remaining payments without complications. Revisit beneficiaries on your IRAs and insurance policies to be sure they reflect your current goals. Many retired owners also consider charitable giving or scholarships at this point.
Finally, allow yourself to enjoy this new beginning. If worries arise, return to your financial plan. Many retirees meet with an advisor a year or two into retirement to confirm they remain on track. As a CPA, you are used to working with numbers, and now those numbers serve you. You’ve shifted from firm owner to the CEO of Your Retirement, Inc., and the same habits that supported your success will support you here as well. Because you integrated retirement planning into your succession process, your firm moves forward with strength and you settle into retirement with greater peace of mind.
Conclusion
When you bring retirement planning into each stage of your succession strategy, the entire process becomes easier to manage. The preparation years give you time to build savings, review your agreements, and set expectations with your team. The transition period lets you put those decisions into practice so the handover feels steady for clients and employees. After the transition is complete, your retirement plan supports you with stable income and a clear approach for managing taxes and investment choices.
This kind of coordination helps you step away from your practice with fewer surprises and more confidence in your long term financial security. If you want to talk through your own timeline or explore which retirement strategies fit your situation, you can schedule a meeting with us anytime by clicking the button below.
