Barriers to Retirement
Going though a manual for a financial planner program, I found it interesting that one of the barriers to retirement is being self employed. Being self employed has many benefits and I believe in most cases, with the right preparation, it is better than to work for others. Besides being self employed, other possible barriers to a comfortable retirement are high living, heavy commitments, spending future dollars, unforeseen or unplanned expenses, divorce maintenance, competing needs and temptations. Other than unforeseen or unplanned expenses, the rest are within the circle of control.
Let’s look at each in detail.
Self Employed
Studies have shown that many self employed people, in my country and I think elsewhere as well, do not have a retirement plan. There are several reasons for that. First, for most business owner, a sum of money is needed to start the business. This could be money saved up in the initial years of working life. In many cases, the money spent cannot be retrieved, for example, through rental, renovation etc. unless the business can be sold lock, stock and barrel.
Second, at the beginning while setting up the business, business owner is busy just to make ends meet, there are no extra funds put aside for retirement. If this phase last 3 years, then there will be a 3 year gap in the retirement fund. A self employed person can choose to top up his or her retirement fund when the business is doing well but on the third point, as business opportunity arise for further expansion, any money put aside for retirement could be raided for that opportunity.
High living and Heavy commitments
These goes without saying. If you spend more than you earn on a consistent basis, you won’t have a retirement. You will not be able to retire.
Spending future dollars
Easy credit abound these days, so spending future dollars is easy. It is a fact that banks and financial institutions are throwing credit cards at consumers. I remember the days when getting a credit card was a big, big thing. You are literally at the banks mercy to get one. Now, it’s the other way round.
Unforeseen or unplanned expenses
Included in this section will be car expenses and accident repairs, uninsured medical cost, and losing or damaging personal property due to carelessness. After buying a good reliable car that needs minimal maintenance, cars still break-down. Or expensive parts need replacement. This could put a dent in your retirement plan. The best advice is to have some money to cater for such unexpected expenses
Divorce maintenance
Besides the initial divorce taking a big chunk of all your assets, divorce maintenance will just about drain off any access funds that you have for retirement. With 2 or more families to support, i.e. your present one if you remarried, the one from the previous marriage, I can imagine how this would turn out, unless you are earning big bucks. Although the world trend is towards multiple partners, why choose to follow the world trend? If everyone is jumping off a cliff, it doesn’t mean you have to follow suit, right? In fact, when it comes to money, if you do what everyone else is NOT doing, you are already ahead, because most of the people are unsuccessful. Best is to choose your mate for life.
Competing needs and temptations
Finally competing needs and temptations. There are more ways to spend your money than to save it. Advertisers come up with all sorts of ways and repackage products to appeal to our inner most desires. And these people work with experts in human psychology to bombard our senses. I’ve know of people moving to quieter parts of the country that has less entertainment and less choice to spend their money, in order to retire with sufficient funds. That could be a good strategy as well.
So, for those contemplating starting your own business, take retirement into consideration as well. Other wise, you could end up worst off than your workers come retirement!
