What would Dr Mo Lar do? Part 9

Richard Lishman

Wed. 1 November 2017

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Over the course of this 11-part series, Managing Director of the 4dentists group Richard Lishman will explore ways to tackle a number of personal and professional challenges by providing advice and guidance to fictional character Dr Mo Lar. In the ninth article, he explains what Lar has to consider for retirement.

After years of hard graft as a successful dentist and business owner, Lar is finally ready to retire. Understandably, his initial priority is to protect his assets and reap the rewards of his years spent in dentistry, but as he also has a growing family to think of, he will also need to consider ways in which he can pass his wealth on to ensure his loved ones are protected.

To gain the most from his estate, careful planning will be key. This will include setting clear and achievable goals for the future, maximising savings and investment vehicles, and above all else, adapting to the changing circumstances. As a first step, however, he will need a clearly defined exit strategy.

Indeed, as Lar’s retirement ultimately rests on the fate of his practices, he may need to sell his business several years in advance or, at the very least, put a plan in motion that means he will be able to take a step back when the time comes. Between marketing and selling a practice, which can take a considerable amount of time, and phasing out time spent in the surgery (many principals are required to stay on part time as part of the deal), it can take several years to actually retire completely. Thus, if he has plans to reduce his hours or stop work altogether by a certain point in his life, he must endeavour to execute his exit strategy as soon as feasibly possible.

Alongside this, he should take the time to fine-tune the various aspects of his income. Luckily for him, Lar has always been very prudent with money and has utilised the guidance of his financial advisers with great results, so for him, it will be a matter of making some minor adjustments. Here is what he will need to consider:

Budget
Having led a comfortable lifestyle, Lar will need to draw up a budget of all his and his family’s outgoings, tallying this with potential sources of income in retirement to ensure that affordability will not be an issue later on.

Pension
There is still time left to save, so Lar should make sure that he continues to put as much into his pension as he can, taking care to monitor the annual allowance. Should he wish to, he could draw down from his personal pension at any point, though it is always wise to discuss this with an independent financial adviser, as there are various tax implications to consider.

Income tax
As it stands, income tax is payable on all gross income that exceeds the personal allowance. Depending on how much Lar brings in during his retirement through his various savings platforms and investments, he may fall into the higher rate threshold, meaning he will be required to pay more. As part of this, he will likely need to prepare for and complete self-assessment tax returns each year—an accountant can help with this.

Balancing portfolio
Lar must continue to monitor and rebalance his portfolio to ensure that he is getting the maximum return from his investments. As he intends for his investments, which include savings, bonds and shares, to make up a sizeable portion of his income, their performance must remain a key priority.

As for the future of his family, there are a number of options available to him. One possibility would be to gift money to his loved ones upon retirement rather than leave assets behind in a will. After all, when one makes a large gift and survives by seven years, it does not then form part of one’s estate on one’s death. As such, not only is it a failsafe way of financially safeguarding the future of Lar’s family, but an effective way of mitigating tax too. Clearly a win-win situation.

Alternatively, Lar could set up a trust fund. While a more complicated way of passing money on, it does have its benefits, including that the trustees (those in charge of the trust) have complete discretion over what benefits go to the beneficiaries and when. Though not the case for Lar, a discretionary trust is a good option where younger family members who are not yet old enough to take control of their finances or those who are less careful with money are involved.

All in all, Lar has a great deal to consider, but with the right help, he can ensure he takes the right steps towards achieving a rewarding and stress-free retirement.

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