The transition to retirement
For over 20 years I have been advising clients on the transition to retirement and what matters they need to address both personally and in their businesses. I am now about to run a seminar on “10 years to Retirement” and I thought, that’s me. I am part of the audience. Like most business owners, when I look at my business I am proud of what I am a part of and it will be difficult to depart from it. At the same time it is important to plan for this to occur. Some of these things need to be considered now rather than later.
Retirement shouldn’t be a spur of the moment decision for anyone. Every individual has individual circumstances to consider about when is the right time for them to move on from their working life into the next stage. This is both a financial decision and a personal one. Is your financial position secure enough for you to stop working? What about you and your family? Have you decided how you will spend your time?
For someone who owns their own business, the issue becomes more complicated. It is not just about how you will manage your personal finances, it is also about how you will ensure that your business is ready for you to leave. It may be that you have business partners that will continue on without you, or you may wish to sell your business to a new owner, or transfer it to your children. You may even decide that you will just “shut up shop”. Whatever you decide, there are financial and legal consequences of your decision and the process will be much smoother if a plan is put in place well in advance.
Things to consider for your transition to retirement are:
- Do you have co-owners and if so do you have agreements in place with your co-owners as to what will happen if one of you wishes to leave? Will they buy you out? Could they afford to? How much will they pay? How do you work out what they will pay? When will they pay? Can you sell your share to a third party? Can the business operate without you or do you need to train a replacement?
- Is the Business valuable without you, or are you the key person with irreplaceable knowledge and connections?
- Is your business set up to run smoothly even if you are not there? Have you got the relevant documents in place for your business, including employment contracts, premises leases, supply agreements, insurances? Having these items in place can make your business more valuable, and make it easier to find a purchaser if you wish to sell it.
- Have you talked to your lawyer, financial planner and accountant? It is important to seek advice before taking any action to ensure you are reducing any risk to yourself and the business, as well as doing things in a way which will minimise any tax payable.
- Have you planned for the worst? Unfortunately, bad things can happen prior to getting to retirement, so it is important to have all your personal documentation in place, including your Will, Power of Attorney and Enduring Guardianship
All these things take time, so it is essential to start considering a transition to retirement earlier rather than later, and seek advice. I know I am seeking advice. If you are a business owner, you may find our upcoming seminar “10 Years to Retirement”, co-hosted by WSC Group Accountants, a valuable information session. For more information on this event click here.