SMALL business owners must rethink their retirement strategy to avoid facing financial hardship down the track, according to Opening Gates.
The business strategist says a growing rate of Australians are planning their retirement around over-valued businesses and facing a longer time in the workforce as a result.
According to the 2015 Intergenerational Report, workplace participation rates for employees aged 65 years and older is expected to increase to 17.3 per cent by 2055.
Opening Gates says another study shows 33 per cent of small business owners will rely on the sale of their business to fund retirement.
Founder Judy Reynolds says the current economic climate is challenging small business owners and the traditional nest egg.
"Increasingly, business owners relying on the sale of their business to fund their retirement are discovering that the market is not what it used to be, leaving them disappointed and unprepared," Reynolds says.
"The key to improving this situation is starting the planning process earlier, much earlier than you anticipate and see a professional to help guide you.
"Set your intentions for life, including when you plan to retire, and then design a wealth plan to fund those retirement years.
"This is particularly pertinent considering two in five pre-retirees and almost half of retirees admit they did not start planning or saving early enough."
Reynolds shares her top tips for preparing for retirement:
1. Start planning earlier, much earlier that you anticipate. Set your intentions for your life, which includes your retirement. Knowing what kind of lifestyle you want when you retire will help you determine how much capital you will need to fund it.
2. When making decisions in your life and in business, consider how they will impact your intentions for your retirement and adapt accordingly. Major life events have affected almost three quarters (74 per cent) of pre-retirees retirement savings, this includes paying off a mortgage (36 per cent) or starting a family (20 per cent).
3. Design a more profitable, future-ready business, which will enable you to be in a better financial position to retire at some future date (this includes looking at your planning, systems, leadership, team, innovation etc.) This is a business that enables you to live the life you aspire to and make the contribution you desire to by maximising profitability over the entire life of the business.
4. Review these intentions/plans regularly and amend where necessary, particularly in light of current economic circumstances and changes in personal circumstances.
5. Diversify. Do not rely solely on the sale of your business to fund your retirement because you may find it's not worth what you think it is.
6. Do not rely on government pensions. Policy changes down the track may affect you.
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