How to plan for retirement – Financial tips for small business owners

A salaried employee from the organised workforce has a clearly defined and stable income, both during his working tenure and after. As a consequence, post retirement financial planning for the salaried class is a well-established and fairly straightforward activity. However, when it comes to a small entrepreneur, financial planning is a major challenge. Whether it is handling finances of the company while he is still employed, or retirement planning when he decides to call it a day and exit from the business.

Remember one thing about retirement planning – the time to start is now! Even if you think you have another 10-15 years before your work life comes to an end. In essence, planning for retirement is a long term forecasting of your finances. Earlier you start, better options are available at your disposal. In this blog, we have put together some basic pointers that can help a small business owner to work out a clear and secure retirement strategy.

Exit plan from your business

Before you start to work out your “what next” plans, you first need to clearly define your exit plan from the business. Are you leaving the business behind for a family member to take over? In that case, you clearly need to segregate your business liabilities from your personal finances. Instead, you may be planning to sell off the business to a third party and invest the proceeds. Then you can consider remaining a passive partner, with a marginal stake. That way you can keep earning some dividends out of the business. There are multiple exit routes from a business, find the path which will give you financial security and self-satisfaction. After all, if it is a business you have painstakingly built over the years, you would derive great pride in its success even after you leave.

Funding your regular expenses

Depending on your family circumstance, you need to work out the recurring monthly/quarterly/yearly expenses that are known. These figures need to be adjusted for inflation. That will give you a bare minimum starting point of how much regular income you need to arrange for, post retirement. Monthly Income Scheme from Post Office, Fixed Deposits with interest pay-outs and chit funds are good alternatives for planning out your regular expenses.

Goal oriented planning

Foreseeing other long term expenses are generally done based on fixed goals. Your daughter’s higher education is 4 years away? You have plans to refurbish/renovate your home a couple of years down the line? Make explicit investments for such one-time bulk expenses. That way, you will never eat into your regular income. Chit funds are perfect for goal oriented planning – whether the goal is long term or short term. They are of fixed tenure and the schemes come in different denominations to suit your every need.

Contingency and discretionary expenses

Emergencies are always to be accounted for. There is no point in investing everything you have and then borrowing when you urgently need cash. A big danger in a retired person’s life is debt. Set aside a reasonable amount in easy liquidity instruments. Chit funds, apart from being a saving instrument also give you liquidity. So that you can pull out your funds anytime you need them.

It is equally important to allocate money for some fun and pleasure. As a busy businessman you may not have had much time for recreational activities. Whether it is a pilgrimage tour, a foreign trip or a new car, who said we are not to enjoy our lives once we retire!

Insurance plans

Insurance is a critical component of retirement planning. Both aspects of insurance – health and life – are to be worked out. Don’t forget to include the insurance premium payments as a fixed expense for the next few years. The sum assured must be reasonably sufficient, so plan accordingly.

Popular options of retirement financial planning are investing in FDs, land/property, equity markets, gold and Government senior citizen saving schemes. In addition to these options, it is worthy to consider putting your money in chit funds. Always pick a registered chit fund house for safe and secure investments.

ABOUT US – Shantala Chits is in the business of chit funds for over 2 decades now. We are a Government approved chit fund company with a 24 year successful track record and thousands of satisfied customers. Shanthala Chits is registered under the Chit Fund Act of 1982, Government of Karnataka. We are one of the most popular chit fund houses based out of Bengaluru, known for our customer satisfaction and secure investments.


Anuradha C

Anuradha is a freelance writer cum corporate trainer in the IT/telecom domain with over 18 years experience. She served in senior technical and management positions in Huawei and TCS for 10+ years. Then gave up the traditional corporate ladder to go solo - in order to escape horrendous city traffic and to be at her own boss!
Anuradha C

Leave a Reply

Your email address will not be published. Required fields are marked *