Your Exits are Here, Here and Here – It’s Never Too Early to Plan for Retirement so Ask Yourself These 4 Questions

Your Exits are Here, Here and Here – It’s Never Too Early to Plan for Retirement so Ask Yourself These 4 Questions

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“Do you have an exit strategy?” is as big of a conversation stopper as “Do you have a will?” or “Do you have power of attorney?” There is reluctance to plan ahead; maybe there is a feeling that by doing something like this you’re tempting fate. Having said that, I’ve known some people who have been planning for the day they finish work since they were in their twenties!

I suppose for some it can be worrying to think that you’re possibly going to get to the stage where you can’t or don’t want to work. Some worry about what they will fill their days with without going to work. However, it is vital to have an exit strategy for what is going to happen to you and your business when that time comes.

What I would say is that it’s a good idea to think about it sooner rather than later.  Then you can put a plan in place.  In my experience, getting a plan in place lightens your stress level and also means that you and your family members have something concrete to work towards.

Think about what you need to do now:

1. When do you want to retire?

“Today would be great” or “I can’t see me ever retiring” are frequent replies I get to this question from two sides of the spectrum. It may seem such a difficult question to answer but you can’t start planning your exit strategy until you know the answer to this question! It’s important to be as realistic as you can.

Here are some prompts to get you thinking about when you want to retire. Think about it seriously, taking account of:

  • How old you are
  • How old your spouse is
  • Your financial situation
  • What you want to do in retirement
  • Your dependents
  • Your business

2. How are you going to exit your business?

If you work on your own, do you plan to pass your business on to someone else or do you intend to sell it? Will there be a target day for finishing and that will be it or will you phase yourself out?

If you have family, are you going to pass it to them? If so, then I suggest you talk to your family members now as this might not be part of their plans.  If they are keen on the idea and don’t work in your business yet, I would start introducing them to the day to day running of it.  Only if they’re old enough, of course!

However, if you’re going to leave, it’s a case of starting the process of making yourself dispensable from today. It may seem like the last thing you want to do after years of conditioning, but it is such an important thing to do.  If you’re still at the stage that you can’t even go on holiday without being disturbed with queries, then you’ll struggle to make a clean break from your business when the time comes.  Now is the time to start delegating to your team and training them.  This will be good for you as it will free you up to enjoy your business more and your team will be more motivated. Also, having more free time will help you to decide what you’d like to do when retired.

Are you thinking of selling your business? It’s crucial to have good systems in place to make it easier for someone to take over and to make your business more attractive to a buyer.  Systems obviously include financial systems.  Ask yourself does everything run smoothly? Are you using accounting software? Are you hitting your deadlines?

3. Retirement goals

Even if your retirement is years away, it’s important to think about what you want to do next and set some goals. 

Give yourself some thinking time away from the office.  Maybe go for a coffee or a walk and let your mind wander. You might want to travel the world, maybe start another business or a charity, take up a hobby, etc.

Obviously, if you have a partner or family, you will need to discuss your retirement plans with them too!

4. Financial considerations for retirement

By putting some time into thinking about your exit strategy, it’s easier to come up with a plan.  Obviously, a crucial part of this planning is looking at your finances.

  • When will you finish paying your mortgage?
  • How much savings do you have?
  • What is the value of your pension pot? – both now and the expected value.

Remember, if you’re a director, you can contribute to a personal pension through your business.  Not only will this help your pension growth but it will also reduce your corporation tax payment.

Whatever age you are, it’s a good idea to make pension contributions. Surely it’s better to put money in your own pension pot instead of giving it to HMRC through Corporation Tax?

  • Do you need to make up for missing National Insurance payments?
  • What is your expected retirement income? Will this be enough or do you need to look at ways to increase it?
  • What are your predicted costs?
  • It’s a good idea to prepare a budget based on your expected income and costs so that you can see if you have enough money to survive, and even better, live a good life!
  • Do you have an up-to-date will?
  • Do you have a business power of attorney?

You may be panicking and thinking that things are going to get harder because of the cost of living crisis; customers may not buy from you and your cash flow will be impacted, etc. Straight away, I’d say stop! Don’t get yourself stressed out about something that might not happen. Stay calm and rational.

One of the ways you may consider as a cost cutting strategy is to decrease or even stop your pension contributions. If this has come to you as an idea then I would think long and hard about doing this. This decision has the potential to have an incredibly detrimental effect as your pension pot won’t be growing as much.

I started off by saying it’s a good idea to think and plan for your retirement now.  You can see why!  It will make life a lot easier and take the pressure off you, your family members and your staff. Good luck!