One of the most common questions we get from successful business owners, entrepreneurs, and incorporated professionals is how much money do they need to retire. It’s a pressing question in the financial planning industry, but oftentimes it’s not the right question to ask.
Most successful business owners have the goal of achieving financial freedom which is different from retirement. If you love what you’re doing, it’s unlikely you are going to want to retire. If you hate what you’re doing, then it’s likely that you’ll want to retire as fast as possible.
Interestingly, the new generation of business owners and entrepreneurs are looking for a freedom component in their financial future. They want to get to the point where they don’t have to work, but if they do, it is because they love what they’re doing. This is significantly different from the old school way of thinking: “Get a good job, pay off your debt, and get to the time when you can start enjoying life”.
A more fitting goal for an entrepreneur is finding that freedom to do what you love as fast as possible.
3 Tips To Calculate How Much Money You Need To Retire
If you love what you do, you may not ever want to retire. But you likely want the option to retire if you choose to. Having the option to retire is what achieving financial freedom does for you. Here are 3 tips to help you calculate how much money you need to retire:
1. Get clear on your retirement goals
It is not just about money. It is about what you are trying to accomplish, in your personal life as well as in your business. If you’re clear about your dreams and goals, then you’re going to get there. If you’re not clear about it, it’s unlikely you’re going to get there.
2. Get clear on your cash flow
Business owners tend to intermingle their corporate and personal cash flow. They know they’re doing really well and having success, but feel like they really should be further ahead. Oftentimes, this is the case when the goals are not clear. It is likely that cash is not allocated towards the important things in life and in accomplishing the end goal of financial freedom.
3. Plan for retirement in after-tax dollars
Plan for your financial freedom after-tax dollars and stop using RSPs as your retirement vehicle. If you have $2 million in your RSP, in reality, you only have $1 million because CRA owns half of that account. So, look at that financial freedom piece, what you’re trying to accomplish, and where you’re trying to go.
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If you want to learn how to achieve financial freedom as a business owner, book a call and we’d be love to run you through our full financial Blueprint process.