How much money is enough to retire…
Q) I am in the process of starting a business in partnership with an associate Can you tell me about buy/sell agreements, as this is not a common practice here.
- A Raymond
Sandi:
While this is common business practices in other parts of the world it has still to find its place in here.
If no exit strategy planning has been done, business partners can suddenly find themselves in business with the spouse or executors of the deceased partner.
To help avoid the possibility of a business failure as a result of these situations, you should enter into a buy/sell agreement funded with life insurance and purchase key person coverage:
A Buy/Sell Agreement is a contract between two parties that defines how a business owner will sell his or her interest in the business.
The agreement also defines how that interest will be purchased and by whom. Such an agreement creates a market for your business interest by facilitating a smooth transfer of ownership.
You should also consider a Cross Purchase: Buy/Sell Option strategy.
This involves having each business partner buy insurance on the lives of other partners
When a death or disability occurs, the beneficiaries of the proceeds use the cash to secure the deceased/disabled partner’s interest in the business.
Q) How much is enough for retirement? What ballpark amount should I be looking for?
Mr & Mrs N Chawla
Sandi:
While I can write reams on the subject, suffice to say anyone planning an active 21st-century-style retirement with spending much more in travel expenses especially if they’ve got children and grandchildren scattered around, a figure closer to 100 per cent of pre-retirement income (and some of my clients need more than 100 per cent) is recommended.
Before you fly off the deep end I think or think I’m cuckoo, Lets follow through.
A MDRT survey on spending in retirement reported, “More households are surprised by how high expenditure needs are in retirement rather than by how low they are.”
Many underestimate how long we’re likely to live! And we overestimate how much we can withdraw from our portfolio without depleting it.
Generally nobody includes health care costs, they underestimate these costs, a growing concern as many health insurance companies have a cut off at age 65, and no government-sponsored programmes.
Don’t underestimate the income you’ll need. Because of that faulty assumption, you may not accumulate a large enough nest egg to provide that income.
Don’t compound your error by assuming that your inadequate retirement cache will have to last for only 20 or so years, when it could easily be 30 or more.
Maybe you can’t plan your retirement with 100 per cent accuracy. However, the more effort you put into developing a retirement plan, the less likely you are to underestimate your spending.
In short if we make an effort, we can be more accurate about assessing our true retirement needs.
Having a myopic view won’t change reality!
Q) Sometimes I need to entertain clients but I am scared the bill will be over what I can afford or that I may embarrass my client by taking them to a ‘cheap’ place. Any pointers on what I can do?
- Ms A Petersen
Sandi:
This is more about social and business etiquette, but as the underlying matter is about money here goes.
Do some home work; check out promotions and special business luncheons on offer.
Choose a place where your guest will feel comfortable
To keep control on the bill based on your budget remove the onus from your guest by taking the initiative and recommending some dishes that are within your budget using phrases like ‘this is a very popular dish here’ or this ‘place is famous for this dish’ etc.
Another way to indicate to your guest the kind of budget that you are comfortable with is to say what you will eat. These sets up some kind of parameter on the price range and your guest will know how to proceed.
Should you pay the bill at the table with the guest/s present?
No! It is much more polite to settle the bill at the cashiers in order to avoid misunderstandings or discussions about paying. This also allows you to inconspicuously pay, look over the bill, and leave a tip.
If you are the guest apply this by asking your host what is good at the restaurant and what he/she recommends.
A little preparation and you will be able to dine your clients on a slim budget!
The writer is a Financial Planner and Member of the Million Dollar Round Table.
Do you have a question for Emirates 24|7’s financial expert. Write to her at financialplanning101@yahoo.com