Retirement Planning
This is NOT just about pensions!
No matter what stage you are within your business life or your business cycle, you should give consideration to what is going to happen when you stop working. Retirement planning is about having sufficient resources to meet you and your family’s needs when there is no longer any business income.
There is essentially a four step review process:
- Identify your assets and liabilities
This is essentially your personal balance sheet but also linked to what income or costs this generates:
Value Debt Private residence Investment property Business assets * Pension funds Other investments (ISAs, shares, etc) Bank deposits
* We can advise on this, what part of this value is linked to you personally?
- What income can these generate?
We can assess the current level of income that your assets can generate. In conjunction with your Independent Financial Adviser, we can project what these funds will be worth and therefore the income that can be generated in retirement.
- What income do you need/desire?
These two items are not necessarily the same. Divide your outgoings into two broad categories:
- Basic essentials – food, utilities, fuel etc.
- Discretionary spend – holidays, cars, gifts etc.
- When would I like to retire?
By setting a time line against these objectives it is possible to establish whether there is a ‘funding gap’ which needs to be bridged.
The length of time will also determine how you go about bridging this gap.
You will need to decide your priorities – are you going to fund towards a planned retirement date OR set a retirement date based upon what you can afford to fund?
Exclude items that will ‘fall away’ in retirement, such as pension contributions, life insurance etc.
Discretionary spend is more likely to be funded out of your capital resources and not from your regular income. The amount required may vary from year to year depending upon your personal circumstances.
This is not a once in a lifetime process. Your business changes over time and in the same way your family circumstances also develop.
Age of children, child care, school fees, university fees and weddings all place different financial pressures at different times. Caring for relatives, inheritances and other wider family situations will vary.
Your retirement plan should be a document that you review periodically. The frequency will vary depending upon how close you are to retirement. A specific event might trigger a review.
As you get closer to your chosen retirement date you should consider this more carefully. In conjunction with your Independent Financial Adviser we can assess your ‘risk profile’ and you should be looking to reduce your exposure to volatility in the value of your investments.
Your retirement plan should be a written document that is capable of review and modification, which results in positive action and management of your personal affairs. We will be here to advise and assist you in this process and ensure that you are receiving appropriate professional advice along the way.
For further information on what you need to consider when drawing up a retirement plan, please click on the links below:
