Retirees face risks but also have advantages

When you think of entrepreneurs, you’re more likely to envision a 24-year-old like Mark Zuckerberg, the founder of Facebook, than a retiree. Taking the risks of starting up a business seems easier to do before life commitments tie you down.

But retirement can lessen the fear of failure that comes with launching a venture. Some people cling to the security of working for someone else most of their lives, repressing their inner entrepreneur until retirement, says Stan Spector, author of The Baby Boomer’s Official Guide to Retirement Income. “They really had a desire for entrepreneurship their whole life. The money and benefits were so good it wasn’t worth taking a risk.” Once retired, they might find that risk to be worth it.

Of course, retirees starting businesses certainly should be careful. The key question that retiree-entrepreneurs need to consider, says Alex De Noble, a professor of management at San Diego State University, is “how much risk are they willing to take after they’ve put some retirement money away.” There are ways to mitigate risk so that, regardless of how a new business fares, the owner won’t lose retirement security.

1. Keep overhead down. Spector says retiree-entrepreneurs should avoid ventures that would require a lot of fixed costs, such as building up a large inventory or leasing a building. “I know people who have had $70,000 or $80,000 [in inventory] in their basement, and [if] they don’t sell it, that’s a big investment. It’s a lot of risk,” he says.

Instead, retiree-entrepreneurs can build service-based companies that require little overhead. One example is services for families with elderly or disabled parents, which can include driving the parents around or helping to sell their property.

2. Time is your most precious asset. While retirees may not be able to put a lot of their savings into a business, they have one asset that many others don’t: time. Retirees have the luxury to focus their business on times when the money really rolls in, such as the holiday season. “Most businesses lose money most of the year and make a killing one month,” Spector says. Retiree-run small businesses that sell goods can get the most bang for their buck by being active during the holiday season and then saving overhead costs by not being active the rest of the year.

3. Use your experience to its fullest. The transition to starting your own business can be difficult. “When you can draw on your past networking contacts from your old professional life, that will lessen the pain a little bit,” De Noble says. Offering consulting services for your old profession, for example, is one way to leverage your experience and contacts.

4. Keep Social Security in mind. If you are under your full retirement age, it might pay not to work as hard at your business if you’re receiving a Social Security check. In 2008, for any person under full retirement age, $1 in benefits is deducted for every $2 that person earns above $13,560 in income. You can find your full retirement age here.

5. Have fun with it. Carlos Warner, 68, of Hickory, N.C., was not particularly Web-savvy before this year. “I had never bought anything online,” he says. But after investing $9,000 in a coaching program to learn Web design and sales, he recently launched a website, It sells specialized kitchen products at discount prices and offers cooking and kitchen tips. The learning experience has been so valuable, Warner says, that it gives him confidence that launching his own business was a good idea no matter what happens. “I’ve had a lot of fun doing this,” he adds. “If I don’t sell my first item, I won’t walk away depressed.”

By Matthew Bandyk

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