Starting a Business After Retirement

By on February 13, 2014

Starting a business can be a difficult, yet rewarding endeavor at any age. For baby boomers getting set to leave the workforce or those enjoying their first few years of retirement may already know that their life savings is not going to last through a 20-or 30-year retirement. This may be the perfect time to start your own business.

Whether you are ready to be your own boss or need some extra income, starting a business can help make your retirement fulfilling and long-lasting. Evaluate all of those business ideas and compare them to your goals and lifestyle to ensure that your business blends with your retirement plans. Then go over the numbers with some professional guidance to make sure your business will make financial sense.

Choose the Right Business to Fit a Retired Lifestyle

When you were younger you more or less ended up in a career by chance. Most people did not choose the industry, products, company or even city in which they work; you just went where the opportunities led. For most retirees, going back to work or starting a business is a more deliberate choice.

Retirement affords you the time and freedom to choose what you want do with your time and how you want to spend or save your money. If starting a business is part of your retirement plan or a financial goal to bring in extra income, carefully consider what it takes to be an entrepreneur and how it will fit into your lifestyle.

Do you want a new business to dominate your life? Don’t assume you can protect your free time. When you first start a small business, it can seem as though there is never enough money to paying other people to work so enjoy your hobbies or see the grandkids.

Most retirees want a low-cost, home-based business they can run part time so they can limit stress and still enjoy leisure time. If your heart is not invested in the success of a startup, you could find yourself earning much less money and requiring even more time on the job than you did as a high paid employee. On the other hand, you may enjoy this second career more.

Ask Yourself these 5 Questions

  1. What is your skill set?
  2. Is there a market for the product or service you want to offer?
  3. Are you dedicated enough to ensure you follow through with your plans?
  4. Is your network reliable?
  5. Do you have enough to absorb a potential financial loss?

*Here are some additional Questions to Ask Yourself Before Starting a Business

6 Factors to Consider Before You Start a Business in Retirement

To answer those five questions and more, here are some factors to consider if you want your business to blend well with the rest of your retirement life:

1. Interests and Motivations

You are more likely choice a successful business trajectory if it is based around something which interests you and helps you reach your financial goals. Whether it’s design, jewelry making, baking or consulting, you will need a business plan that has the potential to provide the return you want.

2. Goals for Retirement and Business

Setting goals will help you effectively allocate your resources to ensure that you live your retirement life purposefully. You will have greater success in your business if it fits well with your larger goals for retirement — visiting family, taking a vacation, etc. — and the lifestyle you intend to lead for the next few decades.

3. Current Skills, Experience and Networks

To operate your own business, you will need to have the skills of both a business owner and employee. Many baby boomers have accumulated expertise or contacts with key figures in an industry that gives their business a head start. These experiences and connections can help you pull together resources, such as funding and finding customers, to get a business off the ground. Many cities have organizations, such as the local Board of Commerce or Key CLub, which support business startups with valuable mentorship, networking services and discounts.

4. Financing a Business

One of the greatest barriers to starting a business is raising the capital to fund equipment, office spaces, new hire wages and more. After retirement you are more likely to have assets (such as a home or investments) which can be used as collateral for business loans or financing, good credit scores which can open doors to traditional bank loans and business contacts with industry investors.

If you have exhausted all other options, you may find yourself wondering whether you should borrow against or tap into your retirement funds. Most financial professionals will advise you not to use your retirement funds to finance a new business and they are usually right to dissuade you. You risk losing your only means of financial support without going back to 9 to 5 work.

Using your own retirement money can give you a degree of flexibility and control over your business investment decisions. Be sure to talk to your accountant and your existing 401(k) account manager to get the right professional advice before embarking on this option

  • Borrow Against Your 401K (up to 50 percent or $500,000, whichever is less. Will include terms of interest and payment schedule)
  • Invest 401K or IRA funds in your business (avoid taxes or interest if you fund your business with retirement funds properly – C Corp.)
  • Withdrawal from your Retirement Accounts (comes with heavy fees, taxes and/or penalties)

5. Back-Up Plans and Exit Strategies

According to the U.S. Small Business Administration, only about 44 percent of new businesses survive the first four years, so it is okay expect the worse and have a backup plan to earn income elsewhere or reallocate your time. Additionally, if you business succeeds, you will need to plan for leaving the business to family, liquidating, etc. when it comes time to retire a second time. Always look ahead to what you’ll be doing the rest of your life.

6. Learn More About Starting a Business

You will also need to do some research to develop a solid business plan, raise funding, brush up on current marketing techniques and customer needs. Dive into community business boards where owners share their knowledge and keep abreast of new and traditional business strategies. If possible, go to a local community college or the business school to take a course on starting and managing a small business.

Speak With a Trusted Financial Advisor and Business Mentor

Retirement may afford you the time and experience to start a successful business, but it will require some prudent financial planning. Consult with a business mentor, review and weigh your options, risks and funding sources, then decide whether to pursue your entrepreneurial dreams.

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About Kendrick Lee

Senior writer and business columnist for FSN - Successful businesses, large or small, will lend to successful owners, employees, local communities and markets for continued economic growth. Since there are so many risks, finances and procedures to consider when running a business, Kendrick is dedicated to sharing business tips, strategies and ideas in the public sphere. Find Kendrick on !

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