Day: December 23, 2016

Not ready to retire? This might be another option.

The word “retirement” conjures up many images. While most baby boomers might be dreaming of more time on the golf course or booking a cruise, you might be thinking about buying a business. Crazy? Maybe not.

If you’re close to reaching your preservation age you will soon have access to your superannuation. An increasing number of people at this stage are taking control of their finances and buying themselves a new later-life career in the form of an established business.

Perhaps you’ve been retrenched and finding it difficult to land a new job. Or maybe, after a short period of retirement, you’re re-invigorated and ready to start afresh.

Seniors bring life experience and skills as well as a wide network of contacts to a commercial venture. But running a business doesn’t always go to plan. Small businesses are risky by nature, often have voracious appetites for capital and are usually vulnerable to irregular cash-flow. .

Assuming you satisfy superannuation conditions of release, consider these questions before leaping in with both feet:

• How much capital will you need? Will you be using your savings or relying totally on super? If using super, consider the risks associated with putting all your eggs in one basket. Do the sums and work out an appropriate balance.

• Will you buy a start-up or an existing business? Starting from scratch means starting small usually with a lot of unknowns ahead.

  Existing businesses come with customers, structures and processes.

  Regardless, your decision must be guided by how much you’re ready and able to put into building and maintaining your new venture.

• Have you sought professional advice? No really – you still need to think about retirement planning, tax, insurance, etc. Important any time, they’re fundamental when you’re self-employed.

• Are you compliant with super regulations? Self-managed Super Funds (SMSFs) exist to protect the future benefits of members. Therefore, all SMSF investments must meet Related Party regulations, meaning that you cannot use SMSF money to buy a business if you, or another fund member, intends working and deriving an income from it. There could be other options available and this is where you need to seek specific advice first.

  Retail or industry funds sometimes restrict lump-sum withdrawals. Access to and the tax applied to a lump sum withdrawal will depend on your age and the taxable components of your super. Your super fund can tell you how much in your account is taxable or tax-free.

  Even though a lump sum withdrawal may be tax-free, if you use that money to earn income, that income will be taxed at your marginal tax rate.

If your business pays you an income, it’s imperative that you speak with your financial adviser about super as significant restrictions apply to concessional contributions. These include age and contributions caps, currently:

• $30,000 if you’re under 49;

• $35,000 if you’re over 49

Be mindful that the federal government is currently looking at reducing these caps considerably, which will impact on how much you can re-contribute to replace the amount you’ve withdrawn.

Access to super below age 55 is subject to strict withdrawal conditions. The desire to purchase a business is not one of them.

• Will you know when it’s time to give up? You probably don’t want to think about this, but Australian Bureau of Statistics (ABS) figures indicate that 60% of small businesses fail in their first three years.

  This is why conducting due diligence before purchasing an ongoing business is crucial. If things don’t turn out as planned, throwing good money after bad won’t help. Will you know when to quit? Do you have an exit plan?

• What about your succession plan? What will you do with the business when you finally retire? Sell? Pass it on to family? Plan for this final stage at the beginning.

Thanks to improved health and medical technology, Australians are living longer, which is why a sound strategy for such a big leap later in life is more important than ever. After all, if 60 is the new 40, then the story is not even close to finished!

by James Black

Will next year be "same, same" or a new adventure?

Another year has swiftly vanished into history. How were the past 12 months for you? Did you make the changes you’d planned or did you resolve for something different this year peter out by February? Don’t worry, there’s another 12 months ready and waiting for you!

If you’re not happy with the way your life is playing out, here are a few steps to help you take a whole new direction.

Step 1.

Decide on the three most important things in your life. List them quickly without too much thought – often your first reaction will be what’s really important.

The list below provides some thought starters.

Step 2.

Decide what you will do in the coming months to make changes in these areas. Take time to write down a series of actions that will make a difference. 

Step 3.

Tell people around you what you plan to do. This will reinforce your commitment and enable you to manage the expectations of others.

Step 4.

Check your progress. Every month, take time to look over your action list and note any changes—even what seem to be small ones.

For example, if you chose ‘Career enhancement’ a first step might be deciding to read one book every month for ‘x’ many months to improve your knowledge on the area in which you want to work. It could be totally unrelated to what you are doing now. This extra knowledge might then be the catalyst for embarking on formal studies to launch you on the career of your dreams.

Small actions like this can make a big change in how you feel about your life. 

What are you waiting for?

If procrastination is your enemy, make a decision to overcome it and do something different RIGHT NOW. One small step could mean huge progress towards improving the most important aspects of your life.

Happy New Year!

by James Black