Current as of December 2014
There’s a thought provoking TED talk by psychologist Daniel Goldstein titled “The battle between your present and future self”. If you haven’t seen it, you should find a spare 16 minutes and watch it. A big part of the presentation is about the balance between your current and future living standards. That is, if you spend too much now, you may not enjoy the retirement you hope for.
People often procrastinate with retirement planning. For those earning a wage, they assume that their employer superannuation contributions will fund their retirement. Business people might pin their hopes on a nest egg on sale of their business. Many people don’t start to become focussed on their retirement until they are in their fifties, and by then many opportunities will have passed them by without them even noticing.
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 to work out your likely retirement income from superannuation and the age pension, as well as to demonstrate some actions that you can take to boost your retirement income.
While the retirement planner is an excellent starting point, it is fairly simplistic and has some limitations, particularly if you are self-employed.
For business people, the range of options to improve retirement income is broad. It’s not just a matter of reducing personal spending and increasing superannuation contributions. They can work on improving the cashflow from their business 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 ensure that they minimise the tax they pay on that sale.
We cover these issues and more in our Business Health Check process, which is aimed at reviewing the key elements that are critical to your financial well-being, and identifying any actions required. Our Momentum range of business advisory services also offer 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 that 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 call us to discuss how we can help you to better balance your present and future financial self.
This newsletter has been produced by Stanley & Williamson as a service to its clients and associates. The information contained in the newsletter is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this newsletter, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under Professional Standards legislation.