It’s Never Too Late: Baby Boomers Reinvent Retirement

Nellie Akalp
Sat, 30 May 2015 00:00:00 +0000

With all the stories about young tech stars founding multimillion-dollar tech startups, it’s easy to think that Millennials are responsible for the bulk of entrepreneurial activity these days. However, according to a Gallup study, baby boomers are twice as likely to want to start a business in the next year than Millennials. People over 50 represent one of the fastest-growing groups of entrepreneurs in the United States.

Flush with decades of experience, network contacts, and financial stability, baby boomers have numerous advantages on their side for starting a business. They’re often in a better position to invest the money needed to get their business off the ground, and they are clear about who they are and what they want.

The “encore career”

After a lifetime of working for somebody else, many boomers relish the chance to be their own boss for a change. According to the Gallup study, 32 percent of boomers choose to start a business in order to be independent, while 27 percent want the chance to pursue their interests and passions.

Of course, the financial incentives of entrepreneurship shouldn’t be overlooked. Owning a business can generate additional income, and enable people to delay filing for social security benefits. David Blanchett, head of retirement research at Morningstar, found that just three years of additional income improves one’s odds of having a financially secure retirement by 55 percent.

In addition, many older people turn to self-employment due to the tough job market over the past years. They start a business after a successful career, because they’ve been laid off and worry about the chances of being rehired.

Being financially savvy and balancing risk

One major advantage of starting a business after having a full career is that you’re more likely to be in a financial position to support the business through savings, even a retirement plan. However, as you near retirement, it’s also the time to be thinking about conserving your assets. Boomers should be well aware of their finances before investing in the business.

If you are considering entrepreneurship, ask yourself: How much can you afford to put into the business? Borrowing funds from a 401k or using home equity as collateral for a loan can put your nest egg at risk. If you are considering borrowing against or tapping into your retirement account, you should speak with a financial advisor or find other resources from the AARP/SBA or at MyMoney.gov.

While it’s important for any entrepreneur to shield their personal assets, it’s all the more critical for those inching toward retirement. After all, the more you have, the more there is to lose. It’s also harder to replace assets at this stage. I think back to when my husband and I launched our first business during law school. We had very few assets to risk if something happened in the business.

The best strategy for protecting personal assets is to form an LLC or corporation for the business, as these legal entities separate the business owner from the business. In many cases, personal assets are shielded should the business be sued or can’t pay its debts. Additionally, you should keep all business and personal finances and accounts separate, and avoid signing contracts personally whenever possible. Doing so puts your personal wealth at risk for business lawsuits.

Lastly, boomer entrepreneurs need to consider their exit strategy. Can the business be sold? Will a child or other relative want to take over the business when you aren’t interested or aren’t able to continue? If something happens to you, who should make decisions about the business? Plan out these transitions ahead of time to avoid any misunderstanding and conflict.

Starting a business as you hit retirement age can be a lot more complicated than in your 20s, but it can also be much more fulfilling. For those boomers contemplating entrepreneurship, the Small Business Administration and AARP have set up a wealth of small business resources specifically geared towards adults over 50.

You can get help with writing a business plan, finding financing, evaluating your market, and much more. Services and training are available in many cities and regions to help older entrepreneurs launch and grow their businesses. Check out SBA’s 50+ Entrepreneurs web guide for tools, resources, and training to help you get started.