An intriguing TED talk by psychologist Daniel Goldstein called “The Battle between your present and future self” delves into retirement financial planning. If you haven’t watched it, I recommend setting aside 16 minutes. The talk emphasises the importance of striking a balance between your current and future living standards, highlighting the potential consequences of overspending now on your desired retirement lifestyle.
The Urgency of Early Retirement Financial Planning
People often think that they can procrastinate with their retirement financial planning. Those earning a wage assume their employer’s superannuation contributions will fund their retirement. Business people might pin their hopes on a nest egg on the sale of their business. The unfortunate reality is that a significant number of individuals tend to overlook the importance of retirement financial planning until they are in their fifties, or sometimes even later. By then, many opportunities will have passed them by without them even noticing.
Are there any tools for Retirement Planning?
The availability of cheap tools to help to plan for retirement means there’s no longer any excuse for not planning early. One of the great free tools on the government’s MoneySmart website is a retirement planner. It is a calculator designed to help you work out your likely retirement income from superannuation and the age pension and demonstrate some actions you can take to boost your retirement income.
While the retirement planner is an excellent starting point, it is relatively simplistic and has some limitations, mainly if you are self-employed.
The range of options to improve retirement income is broad for business people. It’s not just reducing personal spending and increasing superannuation contributions. They can improve their business’s cash flow by increasing sales, reducing costs, and improving working capital management. They might take action to improve the value of their business for an eventual sale. They should also review their business structure for tax efficiency to minimise the tax they pay on that sale.
We cover these issues in our Business Health Check process, which reviews the key elements critical to your financial well-being and identifies any required actions. Our Momentum range of business advisory services also offers much value, with detailed business planning, budgeting, and KPI establishment and measurement, all helping to keep you honest as you strive to achieve your goals (think of the commitment devices Goldstein refers to in his talk).
We think there is tremendous value in starting your retirement planning as early as possible. Please explore the retirement planner to get a feel for how you are currently placed, then contact us to discuss how we can help you to better balance your present and future financial self.
*Correct as of December 2014
*Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.