As a small business owner, there are many considerations you might need to think about when you decide it’s time for retirement.
You might be thinking of selling your business, or perhaps someone is taking over the running of the business. You might stay on in a consultancy role, part time. There are a few options you might want to think about.
Whether you stop working or work part time, you want to be able to afford the lifestyle you would like to live.
The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard has researched some benchmark annual budgets that might give you some idea of what you could need for a ‘comfortable’ or ‘modest’ retirement lifestyle.
1. Planning your retirement
If you’ve been employed by someone else, it’s likely you already have some superannuation saved. There are a number of online calculators that can help you to estimate how much money you may have when you retire and see how you can add to your retirement income.
Currently, Australian employers must contribute at least 9.5% of all eligible workers’ ordinary time earnings to their super accounts if they earn more than $450 a month (before tax). As a business owner, you’re responsible for paying your own super, so contributing to your superannuation from any wage or salary you draw can be a good first step. If you have superannuation, you might want to talk to a financial planner about your options and needs and discuss strategies to help you work towards your financial goals.
If you’re planning to sell your business to fund your retirement, keep in mind that there are legal implications so you’ll need to get advice. Find out more about setting up superannuation at the Australian Tax Office (ATO) website. You can also see how much superannuation you have there, too.
2. Leaving your business
The second part of planning your retirement is making sure to have an exit strategy for when you’re ready to leave.
This is known as succession planning and may involve:
- Finding someone to take over
- Selling your business to someone else
- Ending your business
Depending on what you decide, there are different considerations for each. Start thinking early and you’ll be better prepared for when the time comes.