Are you ready for retirement?
Retirement triggers a range of emotions – fear around financial security, anxiety over the loss of client or customer relationships, longing for the opportunity to pursue a slower lifestyle and perhaps envy for those already there.

Studies are continually showing that retirement ages are increasing with a growing trend of individuals working beyond the age of 65. If the idea of retirement has crept into your thinking, here’s a practical roadmap.

When to start

With many starting their working careers usually with financial weakness due to  study-related debts or business start-up or related costs, the thought of preparing for retirement is not high on your average person’s agenda in their 40’s. But this is ideally when the planning process should start, as it will significantly increase the range of options available in your 50’s and 60’s.

It’s important to view retirement not as a future single day but rather as a transition. This could involve a role change or a change in hours to part time. Given the numerous transition pathways available, retirement is not an “all or nothing” decision.

Your mindset

If your working career is the central element of your life, then the concept of ceasing work is often confronting. It’s important to work hard at building a healthy life outside of work– keep investing in relationships and family, find time for hobbies and interests, and keep healthy. Similarly, don’t just focus on what you are retiring
from – think about what you are retiring to. A common concern is the loss of mental stimulation post-retirement, so plan ahead to make sure you have a list of mentally stimulating activities.  

Finance health check

How far away are you really? For a thorough answer, work with a technical expert (financial planner) to map your current position and identify spending and savings patterns so you can forward project. Starting early really makes a difference - financial independence requires discipline and a long lead time.

If selling your business is key to funding your retirement, then it’s absolutely essential to arrange your business structures to maximise the tax benefits on sale. Often this is not something that can be fixed just before sale – ideally any necessary reorganisation should occur at least three years prior to any liquidity event.

As retirement looms, your asset mix becomes more important. With the reduction or loss of income from work, there is more reliance on the asset base for steady income flows. Are your assets in a form where they will generate sufficient income flow or are they focused on capital appreciation? What about your debt? As part of the lead up, you need to wind back your debt commitments.

Get sale ready

If selling your business is part of your planning, then the journey to maximising your sale value also needs to start at least three years out. Key issues to address include improving the net profit, securing tenancy arrangements, ensuring your staff have
up-to-date agreements and improving your business’ physical appearance. All these help to drive a better sale outcome.

Many business owners like to remain engaged in their company but in a scaled-back capacity. If selling to an existing employee, it’s important to start that discussion early to help address any likely points of contention. There’s a big difference between being the owner one day and a contractor the next. This contrast is even more stark if the buyer is corporate so careful consideration of conditions during any earnout period is essential.

If you own your business jointly and plan to sell your share to the other existing owner(s), do you have an agreed valuation formula in place? Unfortunately even long term relationships can be strained by sale negotiations with tensions during the lead up period. Differing agendas, particularly around investment in practice infrastructure, need to be addressed and managed.

The thought of retirement need not instill a sense of fear and anxiety – early planning and engagement with an advisor will help you successfully navigate the transition and provide comfort for a secure future.

To understand more about how you can proactively manage your future, please chat with Stephen Guthrie  who leads our Business Services & Tax practice
on +61 2 8262 8702  or your principal adviser.

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