Being an entrepreneur, especially one with a small team that runs a small business, means you have great autonomy over your work schedule and finances. And amidst the hustle and bustle of running a business, it's easy to overlook retirement planning. Unlike employees in the corporate world who must retire when they reach 65, entrepreneurs may decide to keep working for longer. While this may not pose immediate challenges, it may be detrimental to your overall well-being in the long run.
For entrepreneurs, preparing for retirement requires discipline, foresight, and consciously accepting the inevitable change. In this article, we'll explore the significance of making retirement plans for small business owners and outline key strategies to ensure a smooth transition into this next phase of life.
Accepting Retirement
A myth exists that entrepreneurs never retire and entrepreneurship is a life-long project. This myth stems from numerous factors, including the emotional attachment involved in managing a business after dedicating time and resources to the course. These businesses tend to become a source of income and a fundamental part of an entrepreneur's identity. As a result, the uncertainty of financial stability to sustain their lifestyles upon retirement may pose a reason for concern.
Retirement, in its real sense, is a period in your life when you relax and unwind after many years of working so hard. We retire because the body is naturally designed to slow down at some point and yearn for rest.
The first big step to planning for retirement as an entrepreneur is accepting the inevitable change and agreeing that you will need to rest sometime in the future. Once you accept this reality, preparing for this phase of your life becomes easier.
Making the Right Retirement Plans for Small Business Owners
Explore Micropensions
Micropensions are like the contributory pension scheme for formal corporate employees, but with a twist for entrepreneurs. They can help you create a measure of financial security and eradicate the uncertainty of financial stability when you retire.
The 2014 Pension Reform Act states that entrepreneurs with a team of three workers or less can explore micro-pensions as a contributory scheme for themselves and their staff. What this means is that whether you are a one-man business or have a small team, you can begin to save up for your retirement years.
Determine an Exit Strategy for Your Business.
In the business lifecycle, the exit stage marks the end of your active involvement in your business. This phase, of course, is unavoidable when you retire and it is only ideal that you plan for it.
Exit strategies you can consider for your business range from family succession, liquidation, or even selling bits of the business. In all of this, remember to consult with your financial advisors and keep stakeholders informed about your chosen exit plans.
Plan for Business Succession
For small business owners who share a strong bond with their businesses, their businesses represent a significant portion of their assets and a legacy that must live on. If you’ve decided on succession as an exit strategy, then it's important to prepare for a smooth ownership transition.
Planning for succession typically involves evaluating potential successors, grooming a worthy successor to get vested in the affairs of the business, and documenting how succession should be done.
Consider Multiple Income Streams
A core part of making retirement plans for small business owners is broadening and diversifying income streams. By diversifying your income, we mean passively investing in viable securities that could create a safety net when you retire. Diversifying spreads your financial security across different assets, mitigating the risk associated with any single source of income. Consider purchasing shares in other companies or venturing into the stock market to bolster your financial portfolio.
Conclusion
Retirement for small business owners can be tricky as one can easily relegate it to the background amidst the daily demands of running a business. However, acknowledging its inevitability and taking proactive steps to prepare for the phase in your life would create some sort of peace of mind as you go about your business.
This is why Oak Pensions is here to support you as you plan for a seamless and confident retirement. Oak Pensions offers insights carefully tailored to help entrepreneurs like you retire. Contact the team at info@oakpensions.com to get started.