It might not seem intuitive to think of starting a business after you’re retired, but a surprising number of retirees are doing just that, according to a recent survey by small business advocate SCORE. The survey indicates that even though persons age 55 and older make up only about 21% of the US population, they own nearly 51% of small businesses. To break it down further, 33% of US small business owners are 50–59, 17% are 60–69, and a surprising 4% are age 70+.
It’s easy to assume that these “gray-haired entrepreneurs” were forced into their roles because of the Great Recession in the early 2000s or perhaps due to pandemic-induced layoffs from their employers. In fact, though, only 15% of them say they started their businesses because of being laid off. On the contrary, the vast majority (76%) of older entrepreneurs say that they are running their own businesses because they love it, reporting that on a “happiness scale” of 1–10, they rate themselves an 8 or more.
Viewed from a different angle, it makes sense. After all, people are living longer. Many experts believe that in the not-too-distant future, many of us will live half or more of our lifespans in retirement. And it’s also a fact that we all require a sense of meaning in our lives in order to be truly satisfied. You may have even heard someone in or approaching retirement make the observation, “You can only play so much golf.” With more people leading healthier lives for more years after they retire from the workforce, is it really any wonder that many of them are seeking new frontiers by launching new enterprises?
But starting a business in your 60s isn’t necessarily the same thing as starting one in your 30s or 40s. Here are a few tips for “senior entrepreneurs” as they evaluate the prospect of starting a business in retirement.
1. What is your “why”?
You need to understand what is motivating you to launch this effort. Maybe it’s a dream you’ve been carrying around for decades, and retirement presents your first opportunity to actually have the time to work on it. Maybe you just want to put off claiming Social Security for a few years, and you need to generate some earnings to fill in the gap. Whatever lies at the center of your urge to build a new enterprise, make sure you keep it in focus as you evaluate the opportunities and risks.
2. Have you got the time?
If your idea of a perfect retirement is being more available to pick up the grandkids from school or take them fishing, you might want to re-evaluate your intention to launch a business. Getting most any new enterprise off the ground is going to require a sizeable time commitment on your part; make sure you’re all-in.
3. Balance the startup costs with your desired retirement lifestyle.
The majority of older entrepreneurs surveyed said they used cash to launch their businesses; some reported using a rollover for business startups (ROBS), tapping a portion of their retirement accounts to fund the startup. But before you employ either of these or some other method, ask yourself how your retirement lifestyle would be affected if things don’t work out.
At Mathis Wealth Management, our chief priority is giving our clients the answers they need to achieve their financial goals, whether that includes funding a secure retirement or launching a “dream business” in their later years. Find out more about how we work with active retirees and others.