This question comes from one of our readers. So how do you start a business after you just retired? It’s something that has relevance as millions of Americans are finding that they are either barely able to retire, or not able to retire at all. We share how to tackle this situation.
Starting a business is something of a halfway point, between retiring in comfort on pensions and investments, and having to continue working full-time at the job you have had all your life.
But if you do have pension and investment income, having a business (at least on a part-time basis) is an outstanding supplement.
How do you start a business after you just retired, particularly if you have never had a business before?
Do You Plan to Live Off Business Income?
Your level of reliance on business income will determine just how seriously of an effort you’ll need to make.
If it will be your primary source of income, you will have to approach it as if you are replacing your job income with business income. If it will be a supplement to retirement income, you’ll have a lot more flexibility.
Stick With Simple Business Plans
In any business you choose to go start, you need to seriously assess the degree of difficulty and stress along the way. This is even more important for a retirement business.
You probably won’t have the physical energy nor the intellectual focus that you had in your 20s and 30s. Whatever business you do choose to go into, it must be one that is easily doable, given your age and circumstances.
If you have held multiple careers in your life, you’re probably aware that there are different degrees of difficulty between different businesses.
For example, I spent too many years in the mortgage business and wouldn’t wish it on my worst enemy. Not only do you need a high degree of expertise, but you also have to put in an incredible number of hours, and do it in the face of intense competition and heavy government regulation.
Blogging and freelance writing on the other hand, are much easier. I don’t know, maybe it’s because I’m just better suited to that kind of work. But the same will be true in your case.
There are no doubt occupations that are fairly easy for you, and others where it will be nearly impossible. Separating the two will be critical. Consider your own experience, and solicit perspectives from others within any business you are considering.
Avoid Capital Investments
If you have a substantial amount of investment capital — and especially if you don’t — you don’t want to go into a business that is capital intensive, particularly one that will require a large investment up front.
By the time you reach retirement age, the bulk of your capital should be invested to provide income for your retirement.
Any money you need to pull out of your portfolio to fund an upstart business will reduce the income stream from that portfolio.
In addition, should the business fail (and many do) you will have lost a big chunk of capital that could be generating income.
What Work Do You Enjoy Doing?
Your retirement years should not be a time to continue doing the work that you have been all along — unless of course it’s the kind of work that you really enjoy.
If you have been working to pay the bills for the past 40 or 50 years, your retirement years can be an excellent time to be doing the kind of work that you actually like to do. In addition to being less stressful, this will also make the business seem a lot less like work.
Match Up Your Skills and Experience
Whenever the concept of self-employment is on the table, people start looking for a business that will be the best one to go into, the most profitable, or the most in demand. Forget about that!
You don’t have time to completely retrain and retool to go into a completely new business, especially if you will be relying upon the income that it will generate.
Consider your skills and experience, they should fit well into any business venture you attempt. It will be tough enough to learn the ins-and-outs of a new business, without having to develop entirely new skill sets along the way. Work with the ones you have, and be sure you can build the business on those.
Not only will your skills and experiences reduce the learning curve and the stress of starting the business, but they will also make the business more profitable. Always play into your strengths!
Compliment Your Investment Portfolio
If you have a large investment portfolio that will provide the bulk of your retirement income, you should try to start a business that will represent a form of diversification away from your investment holdings.
For example, if you’re heavily invested in stocks, you probably don’t want become a stockbroker. A prolonged market downturn or crash could hurt both your portfolio and your business income.
As another example, if much of your investment capital is in real estate, you probably shouldn’t go in real estate sales. A long-term decline in the housing market, or a prolonged period of high interest rates, could hurt both your investments and your business.
I realize that flies in the face of the advice just given about building your business around skills and experiences that you already have. But we can and should make an exception if those skills and experiences are too closely related to your investment activity.
Just as you would in building a successful investment portfolio, you should seek diversification with your business venture.
Ideally, the business and your investment portfolio should be mutually exclusive — which is to say that your business can flourish when your investments are in decline. This is some of the best investment and income protection you can get in retirement.
Start a Business After You Retire
As you can see, starting a business after you just retired requires a lot of considerations. You might want to get it going now so that it will be up and rolling when the time comes.
And the income it earns between now and then would also do a nice job of filling out your investment portfolio.
What kind of business are you starting in retirement?