It’s entirely understandable that, after years spent growing your business, you start to feel the excitement and anticipation of entering retirement.

This is your time to enjoy activities you didn’t have time for previously due to the stress of managing a business. Yet, amid the excitement, you might underestimate some of the financial realities of this next phase of your life.

Indeed, it’s easy to overlook just how much support your desired lifestyle might need – not just now, but potentially for decades.

In fact, data from the World Health Organisation shows that, as of 2021, the average life expectancy in Ireland was 81.6 years, well above the European average of 76.3.

This could mean that your retirement funds might need to last 20, 30, or even 40 years.

This is why it’s so important to understand your “number” – the total amount of wealth you need to live comfortably through retirement without the fear of running out.

It’s vital to note that this number won’t be the same for everyone, as it depends on your dream lifestyle, financial obligations, and existing wealth. Still, once you’ve identified it, you might find that you’re in a much stronger position to plan for the future.

Continue reading to discover three practical ways to determine your “number”.

1. Structure your assets to build a lifetime income

There’s a good chance you’ll experience a significant shift when you first exit your business.

Suddenly, the source of your regular income becomes a lump sum, which you will need to handle carefully to ensure it can support your future. It’s natural to want to make a big-ticket purchase, as you’ve earned it after a life of hard work, after all.

However, acting on impulsive decisions without careful consideration could affect your long-term financial security.

Additionally, you may have built up other assets over the years, such as:

• Private pensions
• Investment portfolios
• Savings
• Property

Each of these can play a role in building a lifetime income.

For instance, your pension might provide a regular stream of income. Whether you decide to purchase an annuity or choose flexible withdrawals, using up too much too soon could result in unnecessary tax or mean you prematurely deplete your fund.

Similarly, you can use your investment portfolio to continue supporting your goals, but it might need to be reviewed. You may wish to take a more balanced approach than you did during your working years, rather than prioritising higher growth.

You could also consider using rental income to supplement your retirement wealth if you own property. Or, downsizing your home could allow you to release capital to fund your dream lifestyle.

Regardless, taking time to assess how each of these sources of wealth can work together could give you a clearer picture of your options and more confidence in what your retirement might look like.

2. Obtain a cashflow model

While carefully reviewing your assets can give you a helpful starting point, you will still need a way to understand how those assets might change over time. This is where cashflow modelling comes in.

This sophisticated software considers your income sources, assets, expenditure, and external events – such as inflation or investment performance – to project how your financial situation could evolve over time.

A cashflow model would incorporate your business sale proceeds, pensions, investments, and property income, allowing you to see whether your current situation aligns with your long-term goals.

It can then highlight possible shortfalls you need to address, or even reveal a surplus that gives you more flexibility than expected.

This can be particularly useful when you’re making big decisions. You might wonder whether you can retire early, give gifts to your loved ones, or increase spending in the early years of retirement.

A cashflow model could help you understand the potential consequences of any choices long before you make them.

Most importantly, cashflow modelling can help you identify your “number”. Since there’s no universal target, a personalised projection based on your circumstances is perhaps one of the more accurate ways to determine how close you are to achieving your goals.

3. Work with a financial planner

Transitioning from business owner to retiree is a significant shift that can be somewhat overwhelming.

This is why working with a financial planner could provide invaluable support.

We have years of experience and an in-depth understanding of retirement planning needed to create tailored strategies.

Moreover, we take a holistic view of your entire life, not just your financial situation, allowing us to create an accurate plan that reflects your aspirations, values, and evolving needs.

We’re also highly skilled at building and interpreting cashflow models, helping you to understand what you can expect from your future.

Financial planning isn’t just a one-off action. As your circumstances change – whether due to market fluctuations, lifestyle changes, or unexpected events – we will continue to work closely with you and adapt your plan as needed.

We act as a sounding board, helping you identify your “number” and reassuring you that your finances are on track.

To find out how we could support you, please 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.

This article is for information only. It is not investment 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.

iQ Financial is not a tax adviser and tax advisory services are not regulated by the Central Bank of Ireland.