Case Study: Selling a Business to Fund Retirement

In this case study, we explore how a client plans to use the proceeds from selling his business to bypass a bank loan, strategically supercharging his Stream Protection Plan for a significantly larger tax-free retirement. 

Father wants his family legacy to continue

Our client, a 43-year-old HVAC business owner, considered how he could protect his children in the event of his death. He wanted to ensure the family legacy could continue without being derailed by estate taxes his children might be unable to afford.

He joined the Stream Protection Plan

After hearing about the potential of a tax-free retirement, he decided to secure his future with a Stream Protection Plan to safeguard his golden years and provide his family with financial security should anything unexpected happen.

A better way to turbocharge his tax-free retirement

While mapping out his Stream Plan, we uncovered an even better approach than our usual model of using a bank loan to turbocharge the policy.

The client owns a second business, which he plans to sell in ten years. With that liquidity event on the horizon, he has several options for leveraging the proceeds. However, he decided he would funnel those funds into his Stream Plan rather than follow the more traditional avenues (you know, savings account, stocks, a boat!).

Typically, the Stream model works by having you contribute a nominated amount ($5k minimum) annually over five years. This money is then used to secure a bank loan, providing ongoing leverage to amplify your policy’s value. After five years, your financial contributions stop, and the loan handles the rest. This strategy allows clients to accelerate their tax-free retirement with minimal upfront commitment while benefiting from a zero percent-floor safety net that protects against market downturns.

However, in this client’s case, the impending sale of his second business presents an opportunity to eliminate the need for a bank loan. So, instead of using a tax-free asset to pay off a loan that he can afford upfront, he’s choosing to inject the proceeds from his liquidity event – approximately $3.5 million – into his Stream Plan. This decision will dramatically increase his retirement income without the risk of a rise in a loan interest rate.

The way to work cash value even harder

Let’s break down the numbers: The client is opting to contribute $50,000 per year. If he followed Stream’s standard bank-loan strategy, he would contribute $50,000 annually for five years for a total input of $250,000. This would generate approximately $135,000 per year in tax-free retirement income from age 65 to 120. However, by injecting his liquidity event – $1.5 million – directly into his Stream Plan, his tax-free retirement income skyrockets to approximately $305,000 annually and significantly increases his death benefit as extra padding for his children’s future.

Them are wise words

As Stream’s co-founder, Tim Whitmore, explains: “If you’re in a position like our client, why would you use a tax-free asset to pay back a bank loan? You want your retirement fund to keep growing for you,” he says. 

Whether you’re planning to leverage a liquidity event, an inheritance, or even a lucky lottery win (🤞), investing that cash value into your Stream Protection Plan can help elevate your golden years without handing Uncle Sam more of your hard-earned dollars.