The retirement trap: Failing to properly plan for your later years could keep you from selling your business.

• Position: Business Guide 2017: Northwestern Mutual

There are two story lines here. The first involves a successful business owner. We all know one. We admire them, envy them, and maybe we are them. I'm calling mine Phil. He started his business long ago, when his needs were simple and ideas unrestrained. Anything was better than getting a job, so he jumped in at a time when clearing $1,000 per month left plenty of room for fun. Advance the clock 30 years, and Phil is getting close to age 60. For Phil, the business worked out and life is pretty good. He has a great family, beautiful home, a place at the beach and nice cars. He's a member of the golf club and gives generously to the fundraisers. Phil's got it made. He estimates the business is worth about $5 million and complains about all the taxes he pays from his $500,000 of profits each year.

Here's the second, seemingly unrelated story line. From a 2015 article in Barron's tided, "Retirement Rules: Rethinking a 4% Withdrawal Rate',' Reshma Kapadia writes that the 4% rule was first introduced in 1994 by financial advisor Bill Bengen and soon became conventional wisdom. Some readers may even remember the 1980s, when 5%, 6% and even 7% were discussed as reasonable withdrawal rates. Kapadia quotes Wade Pfau, professor of retirement income at the American College of Financial Services: "The rule suggests that if retirees withdraw 4% of their portfolio in their first year of retirement, and adjust that initial amount for inflation in subsequent years, they'll have a low risk of depleting their portfolios in 30 years." Pfau goes on to say that today, 3% is a better starting point for inflation-adjusted spending and this is not expected to cover the cost of medical and long-term care costs, which need to be handled separately.

Let's go back to Phil, who luckily found a buyer for his business and got his asking price of $5 million. Phil has a good CPA, who keeps the tax burden on the sale to $1 million, so he nets $4 million. Phil is now quite proud of his big, fat investment account holding all this money. He's set, right?

Here's where the two story lines collide. Now retired and with time on his hands, Phil begins to design his retirement lifestyle by doing his reading and meeting with with a certified financial planner, and he does not like what he's learning. His business intuition was fantastic, but unfortunately, his financial planning intuitions had not kept up because he was thinking that the 10% yield he got from his business must...