The Perks of Self-Employment: Let’s start by acknowledging the benefits of being your own boss. You can organise when you work more freely than if you worked for an employer. You enjoy more control over your financial journey (most of the time). You can decide when to upscale or downscale.
The Downside of Self-Employment: You’re it. Even if you have staff to help you, you are responsible for everything: taxes, insurance, ensuring work gets done, Health and Safety, the trajectory of the business etc. And no employer paid superannuation.
- 1. Superannuation Contributions and Limits: Now, let’s crunch some numbers. There are annual contribution limits for superannuation, both concessional (before-tax) and non-concessional (after-tax). Be aware that these limits are subject to change, so it’s crucial to stay informed. But here’s a silver lining – you can carry forward any unused concessional contributions, making it easier to catch up.
- 2. Investing with Wisdom: The success of your retirement planning largely hinges on your investment choices. It’s wise to diversify your portfolio to spread risk, whether it is buying an investment property, shares or adding to your superannuation. Remember that higher returns often come with higher risk levels. Consult a financial advisor for expert guidance.
- 3. Ensuring your Business Provides for You: How do you want your business to serve you when you retire? Do you want to still own it and take part of the profits to sustain you? Or would you like to sell it and invest the proceeds? Either way, work needs to be done to ensure all of the systems and processes are up to date so your business can run without you.
- 4. Insurance Matters: Surprisingly, insurance is often overlooked by self-employed individuals. Yet, it holds tremendous importance! Income protection and life insurance can serve as a safety net if unforeseen circumstances arise. Safeguarding your earning potential is a cornerstone of long-term financial security.
- 5. Planning for the Long Run: Think about what you would like to do in your retirement. Would you like to travel? Do volunteer work? Learn new skills? Estimate your expenses during retirement and create a realistic budget. Contemplate your desired retirement age and strategize how you’ll make the transition.
- 6. Seeking Professional Guidance: Retirement planning can be intricate, especially for the self-employed. Seek advice from financial advisors, accountants, or SMSF specialists. They possess the expertise to help you navigate the nuances of SMSFs and ensure you’re on the right path.
- 7. Start Today, Thank Yourself Later: The best moment to embark on your retirement planning journey is now. Your future self will thank you for putting in the hard work for financial security. The magic of compounding works wonders when you give your money ample time to flourish.
Your golden years can indeed be just that – golden!
