How to retire sooner and smarter 

12/02/2020

Many people only begin to think about retirement a few years before they reach retirement age. The reality is that when it comes to saving for your retirement, the sooner you start thinking about it, the better. 

Retirement is a very personal thing, so the first step to take is to take a long, hard look at your goals. The prospect of retiring early can be a very attractive one, especially if you have travel plans or are keen to spend more time with family. But it’s important to know all the implications for your finances in later life. You might have to make many lifestyle changes in the short term in order to retire younger – and your savings goals may not quite match up.  

The good news is that these days, investing in property is far from your only option when building up funds. There are many lucrative ways to save for your retirement. 

Predict your expenditure 

Before you do anything else, examine your current expenditure in detail. When you look at your expenses, think about which are essential to daily life and which are lifestyle choices which could be amended. It is hard to predict exactly what will change after retirement, but you can start by making assumptions about what might happen. 

When we speak with a client about their retirement plans, we use cashflow modelling technology to support these assumptions. We’ll look at the assets you have now, any current secure income streams or ones you can expect in future. We put all these streams and assets into the model, taking into account expected inflation and investment returns. Then we run different models, such as what if your investment portfolio actually only returns 3%, not 5%? The model can tell us what the likelihood is that you will have the desired funds leftover once you do reach retirement.  

Work towards an exit 

Every entrepreneur is different. Some want to work forever, while others are looking to sell their business and step away from it. 

When we work with entrepreneurs who are looking to retire in a few years, our financial advisers will also speak with them about their exit strategy and help them work towards a sale. We’ll look at valuation, how to structure the business to get the most value out of it, what the exit route might look like and even help them to fund the purchase itself.  

Using your Wealth Wisely 

Once you’ve sold your business, you need to consider what to do with the resulting cash. When you have a trading company, the value of the business is exempt from inheritance tax. But how can you maximise its value for your retirement fund? Will you give some of that money away to your partner or children? And how can you pass it on without losing a chunk of its value to tax payments? 

We assist many of our clients with estate planning options once they’ve sold their business – whether that’s setting up a family investment company, guidance on investments or advising on regular gifts of surplus income. 

As with your investment portfolio, diversification is the best option – if you’re an experienced property investor, you might want to invest in property as a means of funding towards your retirement, but it’s not an asset you would want to depend on alone. A typical entrepreneur’s portfolio might include a few properties, assets such as cars, stocks and shares, a SIPP or SSAS pension fund and a portfolio of investments. 

Planning for your Retirement 

Once you’ve set up your cashflow model, adjusted your expenditure as needed and diversified your retirement portfolio, you’ll find saving for yours and your family’s future starts to become second nature. With the right structures in place, you won’t be thinking “how much do I need to save this month for my retirement?”, but “how did I manage to save that much?”. 

Prydis have a rare and unique approach to financial planning – our in-house experts specialise in wealth management, legal and financial services, so you can talk to us about anything from estate planning and your investments to selling your business. Speak with one of our account managers today on 01392 432431 or email us at mail@prydis.com. 

Liz Andrews

This article was written by Liz Andrews

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