Do you have an exit plan?
Tim Mackay FCA on why creating an exit plan can help ease you into a hassle-free retirement.
- Create an effective exit plan and your life in retirement can be full of opportunities.
- Have an exit plan, and stick to it.
- Define retirement on your own terms.
More than a decade ago I took a calculated risk by becoming a business owner. I stepped away from the relative safety of employment at global financial institutions and into my own private wealth management firm.
One of my first actions was to ask trusted friends, colleagues and family for their advice. A managing director at Goldman Sachs asked me fairly bluntly, “So what’s your exit plan?”.
I’ll be honest – I didn’t enjoy being asked how I was planning to exit something I was so excited to be starting. I was focused on the exciting growth opportunities that lay ahead.
Next I sought advice from a partner at McKinsey & Company, and was surprised when one of his first questions was, “So what’s your exit plan?”. I suddenly realised I was missing one key part of the puzzle.
Begin at the beginning
The trusted professionals were focusing me on my end goal; they weren’t raining on my parade.
Are you a high-flying and respected professional with an enviable career? Yes? Then what’s your exit plan?
Your exit plan is your retirement. It’s going to happen one day whether you like it or not.
Consider how many prominent business people, sports stars and politicians have failed because they didn’t have an exit plan.
To put it bluntly, your exit plan is your retirement. It’s going to happen one day whether you like it or not. It’s completely up to you how much control you take over this process.
Life begins at retirement
For some people, retirement means winding back the days they work. For others, it’s shifting to consulting or volunteer work, an exhilarating period of global jet setting or financially helping your family.
There is no single definition of retirement, there is only how you define retirement on your terms.
Go until you come to the end
If you’re successful in your career then you’re probably good with numbers. If you have the time and inclination, you may not need to pay a professional advisor to devise your retirement plan.
It can be an incredibly exciting process to plan what your dream lifestyle in retirement looks like. Envisaging what you want to do enables you to put firm numbers to funding those activities.
For the technical among you, simply apply basic inﬂation assumptions to your life expectancy (and beyond) to calculate your future cash ﬂow requirements in retirement, and then derive a present value calculation. Compare how much you will need at retirement to how much you project to have – that’s your basic financial plan.
It can be an incredibly exciting process to plan what your dream lifestyle in retirement looks like.
Once you have an exit plan for your retirement, it should give you a sense of excitement and opportunity and empower you with an array of options.
For my exit plan, I did end up taking my friends’ advice in the spirit in which it was given. It made me re-assess some of the decisions I was making, particularly in regards to structuring and succession planning. I now have a solid plan.
The truth is you will never stop – retirement is not the end, merely another beginning. If you have the foresight to create an effective exit plan today, then your life in retirement will be exciting and full of opportunities.
This article is part of an ongoing Wealth Management column offering tips on personal wealth management and analysis of issues within the wealth management profession. Have something you’d like this column to cover? Email the Acuity team now.