Retirement planning: Why many entrepreneurs act too late

Everyday stress and a lack of overview are just some of the reasons why many tradespeople procrastinate when it comes to retirement planning. We explain how you can still tackle it.

This article is part of the special feature on retirement planning – what's worthwhile for tradespeople.

Many self-employed people put off their retirement planning until they're in dire straits. A lack of oversight, insufficient time , and unrealistic expectations can quickly lead to problems. We explain how entrepreneurs can do better.

Everyday life obscures overview

In the end, frustration remains. That's how one would describe entrepreneur Rüdiger L.'s attempts to get his finances in order in one crucial aspect : his retirement planning . He plans to retire in about eight years, and by then everything needs to be finalized.

After scheduling this appointment, L. tried to get an overview of his finances . This proved difficult. Due to his heavy workload, L. barely paid attention to his personal finances. For example, he simply filed away current statements about the performance of his life insurance policies ("account statements") without checking them . He also regularly filed away his bank statements regarding his securities portfolio without reviewing them. While he could quickly compile the outstanding loans for his single-family home and two rented apartments, he didn't know if, or to what extent, these loans would still burden him in retirement. He completely lacked a clear picture.

After his unsuccessful attempt to get his finances in order, L. pulled the emergency brake a few months ago. He asked his bank 's investment advisor for help. Initially, the advisor showed great commitment. But over time, this noticeably diminished.

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Do your own homework first

L. now realizes that the bank failed to meet his high expectations, partly due to his own behavior . He only provided the advisor with the documents specifically requested – and even then, irregularly. During the entire processing time of almost six months, L. deliberately refrained from having a single in-depth conversation . He then made a clear decision: he will only actively approach his bank again and demand concrete proposals once he has completed his own "homework."

This includes fully assessing his financial situation. He also wants to precisely determine his desired monthly income in retirement. Following this, he plans concrete steps to achieve this goal within eight years. L. is certain he can only succeed if he involves not only his bank but also his tax advisor , who has been supporting him for many years. He also intends to examine whether he can divest himself of financial burdens – for example, his rented apartments, should they no longer generate the desired return.

The entrepreneur knows he still has a lot of work ahead of him. One example illustrates this clearly: According to his bank's calculations, he will still have around €70.000 in debt in ten years if he doesn't change anything. The reason lies in the past. Back then, he temporarily suspended his loan repayments because his cash flow was tight . He hasn't closed this gap to this day – and he apparently underestimated the consequences. The following checklist would have enabled the entrepreneur to plan better.

Checklist for retirement planning

Here's what you should consider when planning for retirement:

• Determine which monthly amount net income They want to reach you in retirement. 
  
  
• Obtain a complete Overview about your assets, including existing and future pension entitlements. Calculate your net worth (assets minus liabilities) and the income that can be generated from it. 
  
  
• Pay particular attention to your future income. stable and sustainable Whether you prefer to invest in securities or real estate depends on your personal investment behavior and risk tolerance. 
  
  
• Check if you Pay back loans faster You can or should sell assets. This will help you reduce financial dependencies. 
  
  
• Use this information to collaborate with your bank to develop suitable solutions and to specifically close supply gaps. 
  
  
• Extra tip: Carefully consider whether savings plans or lump-sum investments are more suitable. speculative investments How stocks or equity funds fit into your timeframe. Such offers often sound tempting, especially when high returns are promised. However, the investment horizon is crucial: For such investments, you should plan for periods of six to eight years. Furthermore, you should only invest amounts that fit within your personal budget. Willingness to take risks fit.

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