-- 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.
This is not to say "don't do it." Rather, it is just a word of caution. Be sure you really want to invest the time necessary to make it a go.
2. Be careful not to invest too much. Especially when so many people have taken a huge hit on their retirements accounts, you have to be extra careful not to lose another chunk. As I said, entrepreneurship is a risk and your business may — or may not — fly. By being careful not to invest too much you hedge yourself against taking an unacceptable loss.
By the same token, if you decide to take out a loan to start your business, be prudent. Don't get in over your head with indebtedness that you will be unable to afford if things go poorly.
3. Use your transferable skills:The skills you have acquired over a lifetime of working are an incredibly valuable asset so make sure you are able to use them in the new endeavor. Sure, the thought of trying something new is exciting, as well it should be, just be sure that the new thing utilizes your old skills.
4. Consider buying some sort of established business:You essentially have two choices here:
• First, you might want to buy an already-established business. This is a tried and true way to reduce the inherent risk of the entrepreneurship (ad)venture. Established businesses are known quantities; they have a track record, a record of profit (or loss), an established clientele, and so on. Those are valuable things.
• Second, you might also want to consider buying a franchise. Like an established business, a franchise is a business where most of the kinks should already be worked out. There is less trial and error.
5. Have fun. Being you own boss after 55 can be a blast, if your venture makes money and does not take too much of your precious time. Choose wisely.
Today's tip:I recently participated in a couple of events for AT&T and Blackberry for the new Blackberry Bold. I haven't been excited about a new cellphone in a long time, but man, was this one cool. Steve says check it out!
Ask an Expert appears Mondays. You can e-mail Steve Strauss at: email@example.com. And you can click here to see previous columns. Steven D. Strauss is a lawyer, author and speaker who specializes in small business and entrepreneurship. His latest book is The Small Business Bible. You can sign up for his free newsletter, "Small Business Success Secrets!" at his website —www.mrallbiz.com.