Retirement planning tips for the self-employed

piggy bank in front of tablet with a retirement planning graph on it

 

 

Pensions

You can pay into a personal pension when you’re self-employed. You may be surprised at how little you can start your contributions from if cash flow is your main concern. You could start off paying in a smaller sum and then increase it over time as your business grows or you feel more comfortable with things.

You can also take advantage of tax relief on pension contributions, potentially meaning you can contribute less and make the most of the government top-up. If you’re a basic-rate taxpayer, for every £100 you pay into your pension, the government will add an extra £25.

 

Using your business as your pension

Is your plan to build your business up and then sell it later down the line to fund your retirement? If so, then you need to plan carefully to ensure that your company will provide the financial means you are aiming for. Take a look at our blog post –   Is your business your pension? – for tips on how to make the most of your company to provide yourself with an income in retirement.

 

Using property as a retirement plan

Perhaps you have buy to let properties or plan to invest in property to provide yourself with an ongoing income over the coming years. This can potentially give you additional funds before retirement age and provide some financial protection should you be unable to work in your main career.

However, the property market is ever-changing, and the costs for landlords can be high. Know what you are getting into and ensure that it is a profitable endeavour for the long term.

 

State pension

Currently, anyone who has paid 35 years or more of National Insurance Contributions is entitled to a full state pension. This pays £168.60 per week, that’s only £8,767.20 per year.

That amount of money is unlikely to be enough on its own to meet all of your financial commitments. There is also an element of the unknown. If you have several years before you retire, then the state pension age could increase or the amount you receive may change.

You can check your state pension on the gov.uk website here. It should form part of your retirement plans; however you may need to consider potential risks of relying on it too heavily for your long term security.

 

Other assets

You may have other assets that could potentially provide a retirement income. From traditional investments to artwork, any asset may be able to contribute financially to your lifestyle. Therefore, rather than just focusing on pensions, you may want to look at your financial assets as a whole and identify different options for generating funds later in life.

 

Get professional support

There are many factors to consider when it comes to retirement planning and owning a business can add an additional layer. You may wish to seek professional financial support to ensure that what you put in place will provide the kind of lifestyle you are hoping for.

It’s not just about meeting your costs today, you will need to factor in the effects of cost of living and inflation over the next 20, 30, 50 years or more.

Your plan will also differ depending on your planned retirement age and the lifestyle you are trying to achieve. Working with a financial advisor can provide you with peace of mind that the plans you put in place will help you to build a brighter financial future. While also having an expert in your corner to help you understand the complexities and find the right solutions for your circumstances.

 

Further information

If you found this information useful, you may also want to check out the following:

 

MRA specialise in business solutions, and are Life Centred Business Consultants based in East Sussex we service clients across the South East, Sussex and Kent, including smaller towns such as Ashford, Battle, Bexhill, Bodiam, Brighton & Hove, Cranbrook, Crowborough, Eastbourne, Hailsham, Hastings, Heathfield, Herstmonceux, Lewes, Mayfield, Newhaven, Rye, Seaford, Sevenoaks, Tenterden, Tonbridge and Tunbridge Wells

 

Sources:

Self Employment Pension and Retirement Planning

What is my state pension?