With one of the lowest savings rates in the world South Africans are definitely not at the forefront of planning for retirement! Many argue that the additional costs of private schooling, hospital care and security make it almost impossible to set enough money aside for retirement planning. If this statement holds true for employees, what are the realities for entrepreneurs?
Well, the truth is, most entrepreneurs believe that selling their business one day will provide sufficient money for them to retire on. While this might appear to be a great plan the sad reality is, the majority of entrepreneurs are either unable to sell their businesses or if they do sell are unable to realize sufficient funds to retire on. So what now?
It is important to remember that retirement planning is a long-term objective and not something you can solve overnight (unless of course you win the Lotto J). With this in mind it then becomes important to look at the regularity of your cash flow, as this will determine your long-term ability to save.
A steady monthly salary with sufficient disposable income is what everybody aims for as this makes retirement planning very simple, as all you then need do is pay your set monthly retirement premiums.
The reality for most entrepreneurs however is that their income is often unpredictable, which then requires that they become more flexible in their retirement planning. As a result, it is possible to pay smaller monthly retirement premiums and then top these up with lump sum amounts as your income allows or even to only make lump sum contributions towards your retirement.
If you are unable to contribute monthly or lump sum amounts and still believe the sale of your business is going to provide all your retirement savings, then it is important that you continuously work towards separating you the person from the personality of your business. If you are seen as separate from your business it does make it easier to sell and very often commands a higher price.
While it would be ideal to have a combination of the three scenarios described above, the reality is you need to put a plan in place that suits your current circumstances while allowing you to work towards your retirement goals.
At PheZulu we do more than just encourage entrepreneurs to plan for their retirement, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, and Company Registration to Payroll and Mentoring.
For more information please visit our website www.phezulu.net or give me a call 010 003 8558
Tyronne Nel