Retirement Planning for Small Business Owners
July 26, 2022

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Planning for Retirement as a Small Business Owner

When you’re busy with the daily management of your small business, you often have little time to think about what’s happening tomorrow, let alone years ahead. No matter whether you’re still starting up or have been operating for decades, you need to think about the future and plan for your retirement.

Many small business owners think they can live off the proceeds of their business. Alternatively they don’t plan to retire at all. But for most, this isn’t the case. Having no specific retirement plan can damage your business and your future livelihood.

At Wealth Smart, we often hear that clients approaching retirement fear losing control and not being able to support themselves. Retirement planning as a small business owner is a three pronged approach. To help you we created this small business owner’s guide to retirement planning.


Plan for your succession

Many small business owners think succession is as simple as passing the everyday duties of business management to their children or a trusted employee. As easy as that may sound, it’s never that straight-forward.

The most important part of your retirement plan is to have a proper succession plan. There should also be a plan B and C if things don’t go quite the way you planned.

Worrying statistics from a 2014 St.George survey showed 54% of small business owners don’t have a succession plan in place. Fifty-five per cent didn’t think they would even have enough money for retirement.

It’s ideal to plan at least five years in advance. Consider who will take over the business management, who will “own” the business and what will happen with properties such as the business premises.

If you plan on selling the business to someone other than a family member or employee, you should consider selling three or four years before you retire if the market is good. It may take you a while to get the price you want. This doesn’t mean you need to stop managing your business.

Similarly, if you don’t own your business property, try to buy it to have an important asset; when you retire you can charge your successor commercial rent to help fund your golden years.

Sort your super and investments

Twenty per cent of respondents in the St. George survey said they believed the proceeds from selling their business would fund their retirement. Twenty six per cent said they believed they could live off the government pension.

This is rarely the case. To reduce strain on the government and your family, it’s important to set up a superannuation fund as early as possible. You should provide for your own retirement as best you can.

Small business owners are generally considered self-employed, which means you are not legally required to pay yourself super. But opening a super fund is one of the most important investments you will make for your future. Plus super contributions have many tax benefits.

Put the right protections in place

According to the St. George study, only a third of small business owners have Life Insurance. This is a frighteningly low statistic as Life Insurance is the best way to protect your family in the event of an unexpected emergency. Income ProtectionTotal and Permanent Disability insurance (TPD), and Trauma insurance are also important considerations.

If you were to pass away suddenly or become ill or injured and unable to work, your business could suffer dramatically. These insurance measures will help absorb the cost of your treatment and rehabilitation.

Business Expenses Insurance is also an easy way to prevent debt and keep your business running while you’re unable to work. It will cover rent and equipment costs and can even pay for extra staff while you’re away.

How do I get started?

Chat to a qualified financial adviser, business lawyer or accountant to start putting your plan together. Even if you know your business inside and out, it’s important to get expert advice when it comes to planning your succession and retirement.

If you’re looking to set up your insurance or superannuation plans, get in touch with one of Wealth Smart’s qualified, professional advisers. They can help you with your insurance needs every step of the way.

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