A common goal for small business owners is to build and grow their business and make it a success. However, something that’s often overlooked is their well-being, particularly retirement plans.
According to financial experts, you should save around 15% of your salary for your pension, however, that’s not the only thing to consider. For example, there should be a Will and possibly a Power of Attorney. Small business owners should also consider their funeral plans.
Here’s some handy advice for getting things organised so you can enjoy a comfortable retirement.
Be More Focused by Defining Your Retirement Goals
What are the goals for your retirement? Do you want to retire to another country or spend your retirement exploring the UK? Are you still going to be running your own business or will you be handing the reins over to someone else?
Your ultimate goals will determine how much you’ll need to live on when you retire. The most you can expect from the UK state pension is just over £8,000 a year. Therefore, it’s crucial that you save as much as you can. This could be with a private pension or some other form of investment such as an equity release.
A very useful tool for anyone who wants to find out what they can expect from a pension is the Government’s pension calculator. It will calculate an amount, whatever age you start paying into a pension and explains what happens to your pension if you delay your official retirement for several years.
What is the Plan for Your Business
Knowing how much you’ll need to achieve your retirement goals will help you decide whether you need to sell your business and for how much. Another option could be to hand it over to a family member or employee so they can continue with the business.
Relinquishing control might not be something you relish thinking about, but if you plan ahead it should prevent any future headaches.
If the plan is to sell your business when you retire, start preparing ahead of your retirement. Give yourself at least three to five years and make sure the last few years of finances are in good shape. This will make your business more attractive to any potential buyers.
Get Some Professional Advice
You need to make yourself aware of the tax implications if you’re planning to sell your business. Also, you need to consider what will happen if you can’t sell your business, or your business fails. Other things to bear in mind are the costs of sale, tax, and how it might impact your return.
Running your own business and placing all your funds and efforts in that one enterprise is considered a risky investment. This is because your plan depends solely on the success of your business.
Should your business experience a downturn, you could find yourself having to rethink your future plans and income. If you want to reduce any risk and increase your options, the smart thing is to diversify your investments.
Being a small business owner and wanting to make the best of it can be a financial minefield. It’s worth taking the time to find some trustworthy professionals to support and help you. A financial advisor, an accountant, and a pension expert, for example, will guide you on issues like compensation for bad pension advice, and ensure you make the right decisions early and not leave things until the last minute.
Start Making Plans Today
You’ve probably chosen to be a small business owner because it’s more attractive than working for an employer. However, with the freedom and flexibility comes the need to be in control of your finances. That includes preparing for retirement to ensure you have no money worries later in life. After all, that’s when you want to slow down.
The best retirement plan for small business owners is one that suits their individual circumstances. Make sure you investigate all the options and talk with an expert before making any final decisions.
You should try to gather as many savings as you can toward retirement every year. Some years you might only make minimal contributions, but the power of time and compounding can’t be overstated.
It’s only natural to want to focus on your business and its needs. So many small business owners think that retirement planning is something they can leave until tomorrow. However, the “I’ll do it another day” mindset doesn’t work when it comes to retirement. The earlier you start planning the better.
In fact, there’s no time like the present, so start saving today.