Studies have suggested that many self-employed Australians are fearful of retirement. Yet much of these concerns can be alleviated, or at least addressed, through forethought and proper planning, advisers suggest.
Vincent O’Neill (pictured), director of private wealth and financial advisory firm Stanford Brown, told My Business that retirement — and how to transition into it — can mean “very different things to different people”, making exit strategies a very personal endeavour, rather than something capable of using a one-size-fits-all approach.
“It’s important for business owners and executives to spend some time thinking about what life after work will mean to them, well before they retire. Going ‘cold turkey’ into retirement is never a good idea,” he said.
“We encourage our clients who are contemplating life after full-time work to spend time envisioning and planning their future years, from all perspectives.”
According to Mr O’Neill, there is a direct correlation between the degree of planning for retirement and the length of time that transition takes: the less time spent planning, the greater the transition takes. But research suggests most self-employed people and SME owners are ill-prepared for this stage of their lives.
“A common theme in our research is that a lack of deep thought and planning in advance of retirement often leads to a longer phase of transition as well as more uncertainty and a lack of direction for the initial years (after the honeymoon period ends),” he said.
“This can lead to disenchantment in what should be an exciting and rewarding period, a time which many people have been looking forward to for the majority of their working life.”
Retirement challenges for business owners
Everyone retiring from full-time work will take some adjustment, but for people who have built and grown their own business over many years, this process can be much more acutely felt.
Mr O’Neill said that for business owners, the greatest challenge is generally handing over their life’s work to someone else.
“Essentially, they need to learn that their job is not who they are,” he explained.
“Anyone who defines themselves by their work, profession or stature will find retirement to be a big challenge.
“The secret is to identify where they funnel their energy now, and what kinds of things keep them mentally active. Busy retirees tend to be the happiest when they are doing things they enjoy.”
Another all too common problem is the glossing over of everyday life during retirement, Mr O’Neill said.
“Often, far too much emphasis is placed on broad themes of ‘travel’, ‘relaxation’, ‘family’, ‘golf’, whereas little thought may have been given towards what retirement looks like on a daily basis,” he said.
“This can lead to a lack of direction, a lot of time in front of the TV and, in many cases, periods of disenchantment.”
As such, he recommends retirement planning involves not just how to get there, but also a breakdown of what to do once you are there.
“For couples, coming together and giving early thought and planning towards the daily/weekly activities in advance of retirement is extremely important to ensure they are both on the same page,” Mr O’Neill said.
“Often, differences in each individual’s expectation of the future retirement years can lead to an adjustment period. Effective planning as a couple involves thought and planning towards activities to be pursued individually as well as together.”
Age and gender matter too
Another planning factor can come down to demographics, with age and even gender shown statistically to impact on how well a person will adapt to retirement, Mr O’Neill said.
He said that for people retiring early in their 50s, giving up work entirely may not be realistic.
“Be prepared to go back to work in a reduced capacity in a different career/role — for less money,” he said.
Part-time work could also include board positions at other businesses or with charities or not-for-profits.
Meanwhile, people aged in their 60s should phase into their retirement, Mr O’Neill said, and consider joining interest groups, clubs or charities as a means of staying socially connected.
For people in their 70s, the financial adviser suggested taking a look at your bucket list and knocking off the most pressing ones while health still permits.
“If it is travel, then get out there, as they may not be able to do this later in life at this age,” he said.
According to Mr O’Neill, men generally find retirement more difficult to become accustomed to than women do.
“Studies show that men can find the transition into retirement more challenging from a social perspective than women, given they are more likely to have their status and social life engrained/in line with their work. Women, on the other hand, tend to be more connected externally with longer-standing networks,” he said.
“Therefore, it is more important for men to explore areas of interest and engage with different groups and networks ahead of retirement to ensure a smooth transition.”
A plan that works
Given these various factors, devising a plan for retirement should not just be focused on what you are retiring from, but also what your are retiring to, Mr O’Neill said.
He suggests giving thought to four key factors:
- Your passion (what you love): “[This is] unique for every person. Pay attention to the times in which you light up from the heart and have those ‘aha’ moments.”
- Your mission (what the world needs): “Find the problem that the world is facing that you feel gifted to solve and impassioned to work on.”
- Your gifts (what you are uniquely great at): “Think of a time where you lose track of time and feel completely engaged — and talk to the people closest to you who will likely know the answer.”
- Your profession (what you get paid for): “[Consider your] specific expertise which may be relevant towards areas of value.”
Other factors that come into consideration in retirement planning, Mr O’Neill said, include:
- Estate planning for the business and intergenerational wealth transfer
- Hobbies and interests
- Community involvement and giving back (volunteering)
- Children and grandchildren
- Travel aspirations
- Continued learning and personal growth
- Writing a book or memoirs