Mind your business: Retirement has its challenges

Retiring means different things to different people. For some, retirement is an opportunity to reinvent themselves and become a more rounded person, while others continue to gain fulfilment from doing what they have always done, maybe in a lesser form.

Many farmers do not prepare well enough for retirement, and when the time comes it becomes too hard, so it is swept under the carpet for another year.

A considerable number do not have a superannuation fund - they have poured all surplus funds back into the farm, so in effect their farm is their super.

In other words, the farm will provide income for the entirety of their retirement. This is fine provided the farm is profitable enough to be able to support them when they can no longer make a contribution. This usually means the next generation of farmers need to be better at the game than they were.

For those who do have a super fund separate to the farm, the management of investments needs strong attention.

Some Baby Boomers have in excess of a million dollars in super and are finding it difficult to make ends meet without drawing down on their capital.

A considerable number of this generation grew up with parents who started with nothing and they had frugality drummed into them at a young age. This now expresses itself in low returning but secure investments.

With the benefit of hindsight, most could have taken on more risk and the nest egg would now have been much larger by now, but it isn't. Hindsight is a wonderful thing but it does not change the present position.

One of my earliest lessons was that low risk brings low reward and high risk brings high reward - there is no other combination of these words.

One thing that was not drummed into me well enough at a young age was the power of compound interest and the impact of inflation.

Interest rates and inflation are low at present but the latter requires further scrutiny. The national inflation rate is based on a list of consumer items and does not include all the items we buy and consume.

Related reading: Mind your business: Set priorities for new employees

If I was to calculate the inflation rate of all my inputs, it would be much higher than the quoted rate.

My energy, health insurance and other costs continue to climb.

With many term deposit interest rates barely covering inflation, you have effectively made nothing on your money by the end of the year.

This is why now more than ever more we need to understand the alternative investments that are available to us and the quality of the advice we receive must be very good.

While the final result of the investment will do much to determine the quality of this advice, we should not wait for this to be the decider. If you receive poor advice, quite often the horse has bolted and your ability to claw back your losses is limited.

There is nothing like a profitable business to provide options in life and for many the past decade has provided the opportunity for this to be the case. It is what you do with these profits that determines your long-term wealth and the subsequent quality of your retirement.

The ideas presented in this article are the author's opinions and should not be deemed as advice.