Entrepreneurs usually focus on their businesses and often, little time is spent on planning for retirement.
Planning for old age is almost more crucial to the self-employed because fortunes are not certain. So being self-employed, can be risky especially when it comes to providing security for the future.
“If your business is dependent on your personal involvement or expertise, it is not always easy to sell it and realise a capital sum for your retirement,” says Laurie Wild, of NFB Financial Services Group.
Wild says entrepreneurs need to diversify their financial interests to secure their retirement.
He advises investing in property, especially owning the property in which the business is housed.
“Very often the property is owned by the spouse or a family trust and rented to the business of the entrepreneur.
This structure allows for continued rental income and property growth, should the business be sold,” says Wild.
Entrepreneurs often overlook basic investment tools like pension or provident funds.
“This form of compulsory savings is often ignored by the small business owner and it can have a material impact on his or her financial security at retirement.
“When taking into account a savings period of 30 years or more, it is vital to build up a retirement fund dissociated from your business interest,” says Wild.
The best investment tool for the self-employed is a retirement annuity. As a non-pension fund member, you can save as much as 15% of your taxable income into a retirement annuity and claim a full tax deduction.
“This means that the saving is done before tax earnings and grows until retirement.
This is free of any income tax or capital gains tax.
“The choice of unit trust retirement annuities implies that your investment will not suffer any significant cost reduction or penalties should you change your premiums from year to year.”
To further secure their future, Wild suggests using a bank’s money to gear more properties as viable options.
Entrepreneurs should also invest surplus funds from the business into growth assets.
Wild says entrepreneurs should build a portfolio of blue chip shares, invest in unit trusts managed by top asset managers and also invest in global funds to diversify equities and currencies.
But with your business commitments it might be a good idea to appoint a professional investment planner to help you manage your assets so you can get on with the business of business.