The phrase “retirement” conjures up many pictures. While most baby boomers are likely to be dreaming of more time on the golf course or booking a cruise, you perhaps fascinated by buying a business. Crazy? Perhaps not.
For those who’re near reaching your preservation age, you’ll quickly have access to your superannuation. A rising number of folks at this stage are taking control of their finances and buying themselves a brand new later-life profession in the type of an established business.
Maybe you’ve been retrenched and discovering it tough to land a brand new job. Or possibly, after a brief interval of retirement, you’re reinvigorated and ready to begin afresh.
Seniors carry life expertise and skills in addition to a large network of contacts to a business venture. However, running a business doesn’t all the time to go as planned. Small companies are risky by nature, usually have voracious appetites for capital and are often susceptible to irregular cash-flow.
Assuming you fulfil superannuation condition of release, think about these questions before leaping in with each foot:
- How much capital will you need? Will you be utilizing your financial savings or relying completely on super? If utilizing super, think about the risks related to placing all of your eggs in a single basket. Do the sums and work out an applicable balance.
- Will you purchase a start-up or an existing business? Ranging from scratch means starting small often with quite a lot of unknowns ahead. Existing businesses include customers, structures and processes. Regardless, your choice has to be guided by how much you’re ready and capable of putting into the building and sustaining your new venture.
- Have you ever sought professional advice? No actually – you continue to need to consider retirement planning, tax, insurance, and so on. Vital any time, they’re elementary whenever you’re self-employed.
- Are you compliant with super rules? Self-managed Super Funds (SMSFs) exist to protect the long term benefits of members. Subsequently, all SMSF investments should meet Related Party regulations, which means that you simply can’t use SMSF cash to purchase a business in case you, or one other fund member, intends working and deriving an income from it. There may very well be different choices out there and that is the place it’s essential to seek specific advice first. Retail or industry funds typically limit lump-sum withdrawals. Access to and the tax applied to a lump sum withdrawal will depend on your age and the taxable elements of your super. Your super fund can inform you how much in your account is taxable or tax-free. Although a lump sum withdrawal could also be tax-free, in case you use that money to earn income, that income can be taxed at your marginal tax rate.
If your business pays you an income, it’s crucial that you simply converse with your financial adviser about super as significant restrictions apply to contributions. These include an annual cap on concessional contributions of $25,000. It will affect how much you may re-contribute to replace the amount you’ve withdrawn.
Access to super under age 55 is subject to strict withdrawal conditions. The will to buy a business just isn’t considered one of them.
- Will you know when it’s time to give up? You most likely don’t need to take into consideration this, however, Australian Bureau of Statistics (ABS) figures point out that 36% of small businesses fail in their first three years. For this reason, conducting due diligence earlier than buying an ongoing business is essential. If issues don’t turn out as planned, throwing good money after bad won’t help. Will you know when to give up? Do you have an exit plan?
- What about your succession plan? What will you do with the business whenever you finally retire? Sell? Pass it on to family? Plan for this ultimate stage at the beginning.
Due to improved well being and medical technology, Australians live longer, which is why a sound strategy for such an enormous leap later in life is more essential than ever. In spite of everything, if 60 is the new 40, then the story just isn’t even near finished!
It’s always wise to plan ahead to balance the life you want to live today with the life you want to live in retirement. If you or know someone in your circle needs help on have questions then we are here to help….