Posts tagged with: retirement

HSBC Research Recap: Australians Financially Unprepared for Retirement

This data is too important to ignore. In the article below from his Successionplus newsletter, Craig West recaps critical data from Australia research by HSBC. This 2014 data confirms trends we see in the U.S.

As you read, consider if any of these concerns are issues for you and your business too. The HSBC research confirms what we see in TV ads from Prudential; that business owners are not prepared for the cost of retirement and their life expectancy will exceed their ‘money’ by 10 years. They expect their savings to run out about half way through their retirement!

Australians financially unprepared for retirement – HSBC research

Craig West – CEO at Succession Plus in Australia []

According to HSBC research into retirement trends Australians expect their savings to last just 11 out of 21 years in retirement, even though they plan to reduce their living expenses by 33% Contributing to the 10-year shortfall is inadequate planning, a preference for short-term saving, and an underestimation of the cost requirements in later life.

Australians’ pension emphasis similar to other western markets – but similarity stops there.
The survey shows that, despite the introduction of compulsory superannuation [pension] in 1992, the average Australian currently expects 30% of their retirement income will come from the pension, 20% from their super (personal pension), 14% from cash savings, 11% from property, and 8% from shares and investments.

Australians not adequately preparing finances for retirement
According to the survey, Australians anticipate their savings will run out a little over half way through their retirement with nearly 60% acknowledging they are either inadequately preparing for retirement or not preparing at all.

The survey also reveals 56% of Australians have never saved specifically for retirement outside of super. Of those, 47% believe they are being held back by Australia’s cost of living (which rises to 57% for 35-44 year olds).

Australians underestimate their spending needs in retirement
The survey finds that Australians, on average, feel they will need just 66% of their working life income to continue feeling comfortable in retirement – the lowest of all countries surveyed.

This shows a lack of understanding of the increased costs of healthcare as people age and the common statistic that for business owners post retirement spending on holidays and travel etc. can actually rise due to the SME business owner having more time available.

Australians more focused on short-term savings goals
Australians are also not helping their cause by having a short-termism approach to saving. The value of retirement savings reduces more rapidly than any other form of money because of the combined effect of inflation and rising life expectancy, so it is likely that Australians will need more of a savings buffer than currently anticipated.

Strong correlation between financial planning and saving
The survey also finds that Australians who sought a professional adviser increased their savings by 5 times.  “With life expectancy on the rise, the need to save and plan for retirement is becoming even more critical. Yet as daunting as the current challenges may seem, the earlier you plan the better prepared you will be.

That last statement is the key to how you navigate this road. Early exit planning increases the value of your business as well as how much you walk away with and when you can afford to cash out. To start planning for the sale, scale or succession of your business, contact us. Your initial consultation is free.

Is Retirement the Same as Death?

Entrepreneurs in the US for the most part are stuck. They are working hard long hours to create an income stream. If they stop working, there’s no income.

The fallacy is that there is no exit, and never will be, if you only focus on generating an income stream to pay your salary or to meet payroll. Without a wealth plan in place, a wealth plan established from profits, then retirement might as well be death because those same hardworking CEOs have no assets to walk away with, no assets to invest for their future.

When I talk to some CEOs and the subject of retirement comes up – you would think I was talking about their mortality. They equate any form of leaving the business as death. They live for the business. They have become so immersed in the business; they’ve lost sight of the purpose of commercial enterprise, their commercial enterprise.

The purpose of all commerce is to make a profit. When a CEO can turn a profit and exit on their terms and timeline, that’s a successful exit.

My assumption is that every CEO wants to liquidate their position in the company they built/own at some point, whether to fund their next step, even if it’s not a classic retirement; secure the future for their family and loved ones; or fulfill the terms of a will or trust. Even those CEOs who resist planning their exit, often procrastinate because they don’t know what to do or how to do it. No one intends to leave their business feet first without a plan for its continued success; but in epidemic proportions, they just don’t initiate and implement a timely exit plan.
When a CEO can walk away from the business with liquidity to fund their reinvention on their terms, instead of a rocking chair, knitting needles or fishing pole, that’s not retirement or death. That’s freedom and financial independence. You can too.

Before you can implement that transition to reinvention, you have to plan it starting with some quiet time to reflect on you, your life purpose and your outstanding Bucket List of goals, dreams, and adventures, accomplishments you wish to pursue or complete beyond your business. Journal about these seven keys to success, in terms of the quality and richness of your life that you want to build after you exit your business.

© 2009- 2016 This Way Out Group LLC top