The pace of modern life and the challenges of running an effective business mean that all businesses have a strategic plan in place. The business plan will be supported by cash flow forecasts and will be reviewed regularly. Tax will be mitigated at every opportunity.
However, this approach may not be mirrored for personal wealth. Business owners and key individuals involved in the running of a business tend to be very focused on the business, but sometimes this comes at the exclusion of other aspects of their lives and their own financial affairs – especially their retirement funding.
Many people with capital built up in their business expect to release it when they retire, but often the business is harder to sell than anticipated. A key focus for business owners should therefore be accumulating alternative sources of wealth to fund a retirement income and replace their annual earned income. This is also why succession planning should be a key consideration, as the continuity of the business will be central to ensuring that individuals are identified to replace those who retire.
A key step for everyone involved in a business is to have their own personal, life event-driven financial plan. A clear view can be taken of what the future may look like in financial terms by using cashflow forecasts that reflect an individual’s personal and financial circumstances, goals and aspirations. This plan will form a contextual background, against which informed decisions can be made – often well in advance of retirement. The questions “How much is enough?” and “When can I retire?” can be assessed in financial terms, as can the often overlooked “What ifs?” For example, what happens to family, the business or other business owners in the event of death or a serious illness?
Mike Wardlaw is a Chartered Financial Planner with Tilney in Scotland, the Society's wealth management partners. Find out more about how Tilney can assist you and clients with retirement planning.