Ask an Expert: Older entrepreneurs, bear this in mind
It's rough out there, but for those planning retirement, it can be even tougher.
— -- Q: Steve — I thought I was set up to retire in five years, but the best laid plans of mice and men often go awry. The stock market crash has killed my 401(k) and I am left considering new options, one of which is starting a business after retirement. How does one do that? — Marv
A: No one likes to encourage people to start their own business more than me, but retirees — actual and would-be alike — need to take more precautions when making this determination, for several reasons:
• First, entrepreneurship is generally thought of as a younger person's game for many reasons, but a main one is that it typically takes a lot of time and energy to start a successful business, and those are things someone over, say, 55 might not want to give to a business.
• Older entrepreneurs also have less tolerance for risk, and starting a business is, by its very nature, a risky proposition.
You also have to consider possible Social Security implications: According to the Social Security Administration, "If you are younger than full retirement age during all of 2008, we must deduct $1 from your benefits for each $2 you earned above $13,560." As an example, the SSA states, "Let us say that you begin receiving Social Security benefits at age 62 in January 2008 and your payment is $600 per month ($7,200 for the year). During the year, you work and earn $20,480 ($6,920 above the $13,560 limit). We would withhold $3,460 of your Social Security benefits ($1 for every $2 you earn over the limit)."
Assuming that you really do want to start a business, here are five things I think you need to keep in mind:
1. Time is your most prized asset:One advantage younger entrepreneurs have is that they have plenty of time — both to put into the business now, as well as to make things up if the business does not go as planned.
That simply is not true for older would-be small business people. First, many do not have the inclination to put in 60 hour weeks so late in their career. And if the business does not fly, there is very little time to make up the lost investment.
Related Stories
ABC News Live