Three key elements of retirement planning all small business owners must think about

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This is the case for many, but as life expectancies increase and people have to prepare for spending perhaps upwards of 20 years in retirement, it is vital that people store enough away to provide for the retirement they want.

Canada Life, a financial services company, has put together some tips for planning retirement as a small business owner so people know what they need to be thinking about.

The earlier people start saving, the less they will have to put away each month – this will also give the pension of pot ample time to grow as an investment.

The first thing people should start to think about is when they want to retire.

Even if people only have a rough idea in mind, it gives them something to work towards and can allow them to calculate how much they will need to save.

People should consider several factors to decide what’s best for them. Factors may include one’s health, financial situation and family.

Read More: State pension: DWP responds to pensioners’ worries of ‘income shock’

Next, people should ask themselves what lifestyle they want in retirement.

These plans will also help people calculate how much money they’ll need for their retirement and will include daily living expenses as well as more luxury spending like travel.

Naturally, if people want to afford luxury experiences like foreign travel multiple times a year then they’ll either need to save more of their income away while working or maybe even work past their state pension age (SPA), which is currently 66.

This may have other benefits as if someone works past their retirement age and doesn’t take their state pension, the value of the pension will increase according to how long it is deferred.

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The next step should be to think about how one’s pension will be funded.

When it comes to this, some small business owners will think about selling their business to raise cash.

This can often be harder than people account for as finding a suitable buyer will usually take time and effort, and even then there are lots of unknown factors and the process can be interrupted by unanticipated events.

Small business owners will also need to have an accurate idea of the value of their business before they actively search for a buyer.

The next step should be to think about how one’s pension will be funded.

When it comes to this, some small business owners will think about selling their business to raise cash.

This can often be harder than people account for as finding a suitable buyer will usually take time and effort, and even then there are lots of unknown factors and the process can be interrupted by unanticipated events.

Small business owners will also need to have an accurate idea of the value of their business before they actively search for a buyer.

Otherwise, owners may decide to sell to a third party, which can take longer.

But none of these options are without complications and although it will seem convenient to pass on a business to a family member or employee, owners will need to ensure they have the right skills and experience to prepare them for the step up.

In this situation, it is likely to take many years for someone to acquire the skills, develop the relationships and build the knowledge that is needed to oversee the business.

People are always advised to lean on the help their advisers can give them. Tax planning, long-term investment strategies and how to draw down pensions will all require being thought through.

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