CPA Retirement Planning: Accountant Practice Succession Guide

Understanding your practice value is essential for retirement planning:

• **Tax practice premium:** Recurring tax clients worth more than one-time consulting
• **Client concentration risk:** Over-reliance on few large clients reduces value
• **Recurring revenue:** Monthly accounting/bookkeeping services command higher multiples
• **Technology systems:** Cloud-based practice management adds 10-20% to value
• **Staff quality:** Strong team that can operate without you increases value
• **Niche specialization:** Healthcare, construction, or industry focus adds value
• **Client age demographics:** Younger client base more valuable for long-term retention

CPAs have several exit strategies, each with unique tax and financial implications:

• **Internal associate succession:** Sell to junior partners over 3-5 years
• **External CPA purchase:** Sell to another practitioner seeking to expand
• **Merger with larger firm:** Join forces, transition clients, gradual retirement
• **Client-by-client sale:** Sell book of business piecemeal (lowest value)
• **Earn-out structures:** Seller financing with payments tied to client retention
• **Equity partner buyout:** Multi-partner firms with existing succession plans

1. 1**5-7 years before retirement:** Identify potential successors, build their relationships
2. 2**3-5 years out:** Formalize succession agreement, begin transitioning client relationships
3. 3**2-3 years out:** Reduce hours, let successor take lead on major clients
4. 4**1 year out:** Final transition, knowledge transfer, regulatory transfers
5. 5**Post-retirement:** Consulting/seasonal tax help during 3-year earnout period

As tax professionals, CPAs understand the power of tax-advantaged retirement accounts:

• **Combination strategy:** Solo 401k + Defined Benefit for maximum tax deferral
• **Age advantage:** CPAs often work into 60s, allowing extended DB contributions
• **Practice sale windfall:** Defined Benefit plan can shelter large lump-sum income
• **Roth options:** Solo 401k allows Roth contributions for tax diversification
• **Backdoor Roth IRA:** High earners use non-deductible IRA to Roth conversion
• **HSA triple tax advantage:** Max out $8,300 family contribution

CPAs advise clients daily on tax strategies - ensure you're using them for yourself:

• **Income shifting:** Pay spouse/children reasonable wages, shift income to lower brackets
• **S-corp election:** Reduce self-employment tax on practice income
• **QBI deduction:** 20% deduction on qualified business income for pass-through entities
• **Cost segregation:** Accelerate depreciation on office building ownership
• **Augusta Rule:** Rent home to business 14 days/year tax-free
• **Accountable plan:** Reimburse business expenses tax-free
• **Retirement plan deductions:** Defer 30-50% of income in peak earning years
• **Charitable bunching:** Alternate years of large donations to itemize
• **Capital gain harvesting:** Realize gains in low-income years at 0% rate
• **Municipal bonds:** Tax-free income in retirement

After decades of building your practice, protect the proceeds strategically:

• **Diversify beyond paper assets:** Gold IRA for 10-20% of retirement portfolio
• **Asset protection:** LLC for investment properties, umbrella insurance
• **Tax diversification:** Traditional, Roth, and taxable account buckets
• **Inflation hedge:** Gold, TIPS, I-bonds protect purchasing power
• **Estate planning:** Bypass trusts, beneficiary designations, updated wills
• **Professional liability:** Maintain tail coverage for past client work
• **Real estate 1031 exchanges:** Defer capital gains on practice building sale