Working in retirement might seem like a paradox. But it can help to provide a myriad of benefits, a potential cushioning to your savings only one of them. If you start your own business, you have the flexibility to create your dream job in your second act, one that gives you purpose and fulfillment.
Being an entrepreneur allows you to be the boss, make the rules, and set boundaries, so you can still enjoy the retirement you envisioned. This is the opportunity to intertwine your passion with work and spend your time building a business that is all your own.
Benefits abound
Naturally, the income stream from working in retirement will help pad your bank account. This will help allow you to take fewer withdrawals and distributions from your retirement savings to pay for living expenses and might help the funds last longer. But that might not sound so attractive if you’re still working for someone else, conforming to their hours and expectations.
The beauty of starting your own business is that you get to determine how small you keep it or big you grow it. You can decide how many clients to take on and exactly what you offer. It’s flexible, yet the structure and commitment can give you built-in purpose.
Studies show having meaningful purpose is important in retirement. After all, many of us not only dedicate our lives to a career but also make our career part of our identity. Running a business would definitely give you that purpose (if it’s an appealing prospect).
While working later in life correlates to improved cognition, there’s a specific benefit if you’re doing a different kind of job than the one you did when you were younger. When you learn something new, psychologists call it “novelty processing,” which may slow cognitive decline. It stimulates curiosity, motivation, attention, and memorization.
According to research by the AARP, loneliness is not uncommon in aging adults. By starting your own business — whether you hire other employees or act as a consultant for other organizations — you’ll have a network of connections. It puts you in an environment to build new relationships and have regular interactions.
Considerations in starting your business
Many retirees are primed for becoming entrepreneurs and may not even realize it. You may have the financial confidence and personal stability it takes to start a business, and the wisdom from the successful career you’ve already had. You can start planning your new venture by drawing inspiration from your experience.
The easiest transition into owning your own business is to do what you know. If you were a marketing executive in your prior career, you can be a marketing consultant for other organizations building or overhauling the department. If you were a CPA, maybe you’ll consider opening a boutique accounting firm that focuses on local businesses’ taxes.
There might be something you’ve always wanted to try in your career journey, but you couldn’t accept the lower salary or take the time away to learn something new. Think about your hobbies and other interests to guide you. If you love to play golf or racquetball, maybe you’d enjoy sharing the sport with young people. If you played the piano or saxophone, perhaps you’d like to open a store that sells musical instruments.
This is a time when you can let your passion win out, especially if you’re not reliant on the income like you were during your peak earning years. It’s empowering to feel in total control of your new career, where you get to go all-in on a soul-filling opportunity.
Before running off to create a website or print business cards, conduct some market research and be sure your business idea has legs. It can be as formal or informal as you want but you should understand the demand and competition in your market. The Small Business Administration (SBA) is a good place to start. Getting in touch with trade organizations or the regional chamber of commerce will give you a good pulse on the local market as well.
Keep balance in mind
Launching a business is exciting, especially when you’re letting your passions guide you. Remember to keep the balance of entrepreneurship and retirement in check. Don’t let a new business venture get in the way of living out some of the other retirement visions you’ve had.
If there are other aspirations that are important to you, work your business ideas around that. If traveling’s important to you, maybe a virtual business is best. If staying active is a non-negotiable, consider something away from the computer.
Additionally, be mindful of the financial investment you make in your start-up. Don’t throw your retirement planning to the wind and invest your 401(k) to get it started. You don’t want to sacrifice the freedom you worked so hard to gain for all those years.
Retirement is defined differently for different people, and entrepreneurship fits in nicely for some. Think about what expertise you can bring to a business and if it’s in line with your vision for this next chapter of life.
Next steps:
If you’re considering starting a business in retirement:
- Think about what kind of business will be fulfilling and where you can lend expertise.
- Decide where you’ll get the money for start-up costs that won’t sacrifice your hard-earned savings.
- Speak to your advisor about income considerations, potential expenses, and your overall retirement goals.
Antonio Sordillo, CFP, CRPC, CFPA, is vice president of investments at Evergreen Financial Partners of Raymond James.
Raymond James and its advisors do not offer tax advice. You should discuss any tax matters with the appropriate professional. All expressions of opinion reflect the judgment of Raymond James & Associates, Inc., and are subject to change.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation.
