Are you guilty of treating your business like a pension?

If you are confident that your company will be sellable at some point in the future, you may make the mistake of assuming that this prospective future sale will easily fund your retirement.

Your assumption may be true – but there’s a chance your sale won’t be enough to fund a full, happy retirement. Market conditions, industry changes, tax regime shifts, and other important elements all need to meet in harmony for you to successfully sell your business at the point of retirement.

If you find that the above factors are not on your side when the time comes, you should ideally have personal wealth to fall back on. Otherwise, your retirement could look different to what you had hoped.

Keep reading to dive into why business owners need to build personal pension wealth over the long term.

Life is full of twists and turns – it helps to have more than one source of income

As mentioned above, if your retirement plan relies on a single successful transaction, you may be taking on more risk than you need to.

There is nothing wrong with building substantial wealth within your business with the hope of one day selling up and enjoying the rewards of your hard work. But if you do not have much personal wealth to your name, and your sale is not as rewarding as you had hoped, you could find yourself compromising on your lifestyle throughout retirement.

So, it’s important that you pay yourself a salary and make pension lodgements. Ideally, this should start as early as possible in life – but if you’re behind, you might still be able to catch up, provided that you form a plan of action now and stick to it.

That’s why working with a financial planner could be invaluable. We understand that navigating the intertwining paths of your personal and company wealth simultaneously is tricky to say the least. Our experienced planners offer you the chance to feel secure in your personal wealth decisions, so you can build a reliable retirement nest egg.

Retirement expenses are going up, meaning your dream lifestyle could cost more than you think

Since the pandemic, the cost of living has generally gone up. You may have noticed that the basics, like groceries, along with larger purchases such as cars and property, are more expensive overall than they used to be.

Not only this, but life expectancies are rising, with the World Health Organisation (WHO) reporting that life expectancy at birth in Ireland rose by just over five years between 2000 and 2021.

In combination, these factors leave retirees with a potential gap in their plans. While living longer is a wonderful thing, these additional years to spend with your loved ones require funding – and a higher cost of living may place further strain on your wealth.

Once again, while your business may provide a healthy capital injection upon retirement, having personal pension wealth on your side gives you additional security.

If you are still years away from retiring, now is the time to:

• Set up a pension if you don’t have one
• Maximise how much you are paying in (as long as this is affordable)
• Assess how much risk you want your investments to take on
• Speak to a qualified financial planner about your pension
• Sit back and watch your fund accumulate over the long term.

If you are on the cusp of retirement and don’t have a pension, it would be worth speaking to a financial planner about your investment options. We can produce a personalised illustration based on your retirement plans and your family’s existing wealth.

Everyone wants to leave something behind

Nobody wants to run out of money in retirement. In fact, most people want to live comfortably and leave something behind for the next generation.

While a pension is not the only way to leave wealth for your loved ones after you die, it’s one of many suitable options that could benefit your young family. If your business sale is enough to fund most or all of your retirement, your pension wealth could remain invested for decades before being passed down after your death.

Create a bespoke retirement plan with iQ Financial

Our financial planners work with business owners to create their dream retirement. Whatever that picture looks like for you, we’re here to help make it a reality and give you confidence in managing your wealth.

To discuss pensions, or any other personal finance matter, email us at clients@iqf.ie, or call 353 71 915 5560.

Please note

This article is for information only. It does not constitute advice.

It describes financial planning services that iQ Financial can offer to you. Financial planning services are not regulated by the Central Bank of Ireland.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.