Cave Financial Services

Small Business Owners: Three Essentials For Successful Retirement Planning

Thu March 22nd 2018

As a small business owner, it's never too early to start planning for your retirement. In fact, research shows those who plan at least 5 years before they retire will lead a happier and more enjoyable retirement. For the majority of business owners the retirement plan usually consists of either transferring ownership of the business to a family member in exchange for a share of future wealth or a buyout, or selling the business to a third party and living off the cash. However, putting all your eggs in one basket is inherently risky. Regardless if you're a business owner nearing retirement, or someone for who retirement may still be some way off, here are 3 things you should be considering now.

1. Develop a business succession plan

Top of the list of priorities is, of course, what will happen to the business when you retire. There are a number of options including an outright sale, transferring ownership to a business partner or family member, and even closing the business altogether. And while it's important to have a plan in place, it's equally important to make sure the numbers stack up for you. The truth is the market may not want to pay what we think our business is worth which means for a good number of us there's unlikely to be enough value in the business to sustain a comfortable retirement.

As well as determining what the value of your business is likely to be, it's essential that you have a clear idea about what your living costs might be and the kind of lifestyle you want to maintain in retirement. Any shortfall between the two figures will need to be made up by savings. Use the retirement calculator on our website to help you work out a savings goal. This could be the wake-up call you need to kick-start your retirement plan.

In addition, in the run-up to retirement most business owners need to take a step back from working in the business and spend more time working on the business. You see, it's important to ask yourself 'Can the business run without me?'. And if the answer is no, then it may well impact on your ability to find a buyer or generate income once you've handed the reins over to a family member or partner. Your business succession plan will, therefore, need to address these issues as well.

2. Make a personal plan

Preparing for retirement isn't just about finances and business, it's also about making the adjustment to having more time and freedom on your hands. And when you've been used to a hectic schedule, the reality of retirement can be a shock to the system. It's worthwhile, therefore, putting the effort into developing a personal plan. Whether it's tackling those DIY projects, taking up a hobby, travelling the world or simply spending more time with the grandchildren, be clear about how you're going to usefully occupy all those hours previously spent at work.

Many people have to retire early due to ill health, and unfortunately we all become more vulnerable to illness and injuries the older we get. Be sure you don't have to sacrifice those retirement plans by unexpectedly having to put all of your money towards medical bills or home modifications. Ensuring you have adequate health and 'Portfolio' (Trauma) insurance in place now means you won't have to give up on those dreams you've been working towards.

3. Get in touch with Cave Financial

We can help jump-start your retirement plan, whether it's advice on business succession planning, KiwiSaver or a diversified portfolio, we can support you making the right decisions for you and your family. In addition, we can ensure all your financial and health affairs are in order before you retire. Get in touch with us here at Cave Financial so you can look forward to a happy, fulfilling and comfortable retirement.


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