If you have been employed for the majority of your life, retirement is relatively simple. You can claim your workplace pension and use this to sit back and relax. However, if you are a business owner or entrepreneur, retirement can be more complicated.
You’ll need to consider things like who will take over the running of your business and whether your funds are sufficient enough to support you during old age. This guide will help business owners to come to a conclusion in terms of what to do with their business when retiring.
1. Release your Home Equity
Whether you are considering setting up an additional business throughout your retirement, or want to add some additional wealth to your pension pot, many people consider the equity on their house as a simple way to grow their funds. By releasing the equity on your house, you can gain a large tax-free sum to help to support yourself alongside your business profits over the years, which is an excellent option for those that have reinvested most of their money back into the business. If you are looking to release the equity on your home to boost your pension pot, Key provides impartial advice and a free equity calculator to help you to find the equity solution that is right for you and your family, meaning that you can live out the rest of your days with peace of mind.
2. Check Your Pension Growth
When your business was at its height, you should have been paying into a private pension to set money aside for your retirement. Many people decide to open private pensions as this allows individuals to grow their money through investment and interest rates set by the pension company. However, pensions sometimes fail to grow at the rate expected due to elements such as fluctuating interest rates and the economic market. Then, before you retire, it is important that you check your pension on a regular basis so that you know whether you will have a sufficient pension to support you as you grow older.
3. Save For Your Pension
Before you retire, it is also important that you set up and pay into a private pension over your lifetime. When employed, employees will be offered a workplace pension on an opt-out basis which is paid into by both themselves and their employer. This means that those who are employed have an automatic stream of wealth entering their pension pot throughout their working life. However, as a business owner, it is important that you are aware of your pension and pay into it whenever you can. Paying into your pension over time will allow you to collect more money than paying into it in a lump sum as your money will be increased through high-interest rates.
4. Consider How to Run Your Business in Retirement
For many, retirement can be boring, and many entrepreneurs will look for ways to continue their business into retirement to help to support themselves. If this is the case, you should find ways to make your business sustainable in retirement. This could include downsizing your business or working from home, employing more staff or partially owning the business, as well as becoming a stakeholder. However, many people look to set up completely new businesses in retirement, and you may want to set up another, smaller business which is based on a hobby or runs on a smaller scale than your last.
5. Phase Out Ownership
If you are phasing out ownership to a relative, friend or business partner, you should put a plan into place far in advance, and make sure that everyone is aware of the process as you phase out ownership. This includes training employees and passing on knowledge so that each staff member knows what their new role involves, and checking that your accounts and books are kept up to date. Like individuals setting up a business, you will need to create a retirement plan to put your ideas into motion.
6. Consider Selling Your Business
If you are not passing your business on to a family member or friend, you may consider selling your business. When selling your business, you should establish how much your business is worth from your financial records and make sure that these are updated to give a realistic interpretation. You should also consider when the right time to sell is through factors such as competition and the economic market. If these factors are in your favour, you can look to sell through advertising in your local area, giving your business to a trust, or hiring a business broker to help you with the basics of selling.