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Everyone gets to that point in their career where they start to see the working finish line in the distance.
Thoughts turn to cutting back on the amount of time you work, or indeed hanging up your boots for good, putting your working life behind you and enjoying the fruits of your years of labour.
To allow yourself to live your life in retirement to the full takes careful planning, and this planning needs to start many years before you actually reach retirement.
We’ve set out 5 questions you might ask yourself a decade before your planned retirement date to help you with this planning.
All of the questions are inter-linked and need to be considered together to ensure you can build the best retirement possible for yourself.
Our short video gives a great overview of the retirement planning process.
How will I finish my working life?
This is of course dependant on the nature of your career. If you are a PAYE worker, your retirement date (chosen by you or your employer) will arrive and you will leave the workforce.
Or will you do this over a period of a few years, cutting back to shorter working hours? This needs to be considered and agreed with your employer.
If you have your own business, the situation is a little more complex. Do you plan to sell your business, and if so who are the potential buyers?
While this list will change, now is the time to start thinking broadly about potential buyers and also how you can improve your business to maximise the price.
Alternatively, you may be thinking about succession within your business. Who will take over the reins and how will they enable you to exit the business on the financial terms that you require? This all needs very careful planning
What’s my financial exit plan?
There are a number of tax-saving mechanisms that can be utilised to maximise the proceeds from the sale or disposal of a business.
Each of these needs to be carefully considered, to identify the optimal route for you and your business.
The main mechanisms include the following,
- Retirement relief: This is a mechanism to reduce a Capital Gains Tax (CGT) liability when disposing (by sale or gifting) of a business or of farming assets. There are criteria to qualify, including ones around age, length of time in the business and your shareholding, so all of this needs to be carefully planned in advance.
- Entrepreneur relief: This is a relatively new relief, only introduced in 2016 with a view to making it more attractive for people to set up their own business. The relief applies to chargeable gains, whereas retirement relief applies to proceeds. Again, there are a range of rules and conditions that needs to be considered, to ensure you choose the right route for your own business exit.
- Pension planning: Pension planning remains one of the most attractive and tax-efficient ways for company directors to extract profits from a company and turn them into personal wealth.
how’s my pension fund progressing?
Irrespective of whether you own your own company, are self-employed or work in a PAYE role, pension planning remains the mainstay of most people’s retirement planning.
The significant tax savings available – tax relief on contributions going in, tax free growth of your pension fund, a portion tax free at retirement and attractive post-retirement options make it simply too good not to utilise.
Ten years from retirement is an important point at which to review carefully the progress of your pension planning. There is still time to have a significant impact on the outcomes you can achieve.
What will I do after I retire?
We spend a lot of time with clients helping them to visualise their lives after retirement.
Apart from helping you to plan for and live the most fulfilling life possible after your working years, we want to understand what your retirement goals and dreams are.
Are you planning on living all year round where you are currently living or will you spend a few months of the year in the sun? What will your regular “big” expense items be such as holidays, the frequency at which you’ll change the car etc.?
What are your long-term care plans and what are your legacy plans for after you’re gone? We can guide you in some of these important areas.
How much money do I need?
This is the nub of it all… Once you know what you want in retirement, we can then put a price on this lifestyle for you.
We can then help you plan so that you can afford to live this life that you want, and this plan starts many years before retirement.
There is lots to consider at the end of your working life, and this needs to be carefully planned in advance. We want to help you live the life that you want in retirement, and to do this you need to consider carefully the transition from your career into retirement.
And this planning should start now. But as a starting point, if you think about these 5 questions, you will be off to a strong start!
Of course they are each hugely complex areas, so we suggest that getting the right advice is central to your chances of success. We look forward to guiding you through this complexity.
About The Author…
Michael Geoghegan QFA CFP, previously of Canada Life and The Irish Government Foreign Affairs Dept., is the Managing Director of Agathos Financial Planning. At the top of his field for nearly 20 years, he is a renowned expert in taxation and trusted adviser to some of Ireland’s wealthiest individuals and businesses.
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