When you run your own business a good retirement plan can bring real peace of mind. Read more about your options – and why it’s never too early to start.
Planning your retirement
When you’re busy running your own business retiring could be the last thing on your mind. But planning your retirement well in advance can make it easier to enjoy the future you want.
Will you sell your business?
Many business owners plan to sell their business to fund their retirement – but it’s important to be realistic. It isn’t always easy to find a buyer who’s prepared to pay the price you want, particularly if you’re hoping for a quick sale. And, even if you intend to keep on working well beyond retirement age, unforeseen circumstances such as poor health or a change in market conditions could force your hand, so it’s important to be prepared.
Saving money for retirement
Personal superannuation isn’t compulsory for small business owners so you might be tempted to put investing in your business ahead of your savings. This can be risky as there’s no guarantee your business alone will provide enough money for you to live comfortably in retirement.
Building your business and your superannuation investment simultaneously can help to mitigate the risk. Many business owners choose a self-managed superannuation fund (SMSF) as this may provide benefits such as a lower tax rate, more investment options and flexibility when it comes to drawing an income. However, a SMSF isn’t right for everyone so you need to discuss your strategy with a professional adviser.
Planning to live longer
In general, Australians are living longer, which means you could spend decades in retirement. Ideally, you’ll have enough savings to cover your expenses well into your nineties.
Financial security in retirement could underpin many of the decisions you make about your business so it’s important to think about the lifestyle you want. As a general rule, if you own your own home, you’ll need 70-80 per cent of your pre-retirement income to maintain the same standard of living. The age pension and other government supplements provide a safety net but, at the moment, these are set at about 28 per cent of the average wage, and this is very unlikely to increase.
The most successful retirement planning is long term. Your spending and your needs are sure to change as your retirement progresses so your plan must be adaptable enough to evolve. And it’s never too early to take action. Once you have your retirement goal in mind you can work out the steps that will help you take control of your retirement and enjoy the lifestyle you want.
Source: NAB
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/business/small-business/moments/future/planning
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