Are You “Too Old” To Start a Business?

I read an article recently that detailed the story of a retired Florida couple who used their personal savings to start their own business. In their case, it was worth the risk, since they’re now preparing to open their third location and are earning full salaries.

This type of move might seem unsafe, especially for those who live on fixed incomes or only have savings in the form of their 401K or IRA. But despite all the financial red flags, studies show that about 35% of new businesses were launched by people over the age of 50.

Since these people aren’t in their prime, and may not be able to recoup their losses as easily, this sounds like a risky venture. With so many losing their jobs these days, you too, may want to start a business but hesitate to put in the capital necessary to get the venture off the ground. I can just imagine the thoughts racing through your head. What if you lose the much needed savings you have left? What if the business does decent enough that you linger on but you end up wasting all your time when you could’ve instead found a job that paid much more?

Are you too old to start a business? Why are so many people choosing to start one?

You Don’t Have to Give Up Looking for Work

With recessions and sluggish markets, employers are drastically cutting job postings. And there’s definitely no lack of competition for the job offers with the unemployment rate already at 20%+. It’s no secret that it can be hard to land a job when you’re competing with a younger, more energetic, and more adaptable workforce. That’s why many eventually give up and try their hand at business ownership.

Luckily, the decision to find fulltime work or start a business isn’t an either-or.

Without that 40+ hour workweek, you have plenty of time to look for a job and still be able to put in the work to start a business. Use this window of opportunity to get that business idea off the ground.

How to Fund Your Business Venture

That sounds great, but where do you get the money?

You can’t withdraw from your retirement accounts without early withdrawal penalties. You may not want to either since doing this puts your future income at risk. Unfortunately, there aren’t many ways to get around the rules. Due to the pandemic, you can theoretically withdraw $100,000 from your IRAs without penalty, but still, you need to pay taxes on that withdrawal and you are giving up years of tax-deferred gains.

There is also a way for retirees to use retirement funds for business expenses, but it’s extremely complicated and easy to get penalized by the IRS if you don’t do it right.

Instead, many retirees are using one of the following ways to fund their new business ventures:

  • Personal savings
  • Small business loans
  • Loans from family or friends
  • Partnerships with established businesses
  • Crowdfunding or crowdlending

Using personal savings to fund a new business is a personal risk, though at least you wouldn’t be ruining your credit or risking bankruptcy. But, in the event the business fails, you won’t have an emergency fund.

Small business loans can be hard to get when you’re retirement age because you’re considered more of a risk. Getting approved is possible, but you’d have to provide more than just a business idea; you’d have to prove your business can make money, and fast.

Loans from family and friends would take away some of the pressure that comes with a formal loan, but you’d still have to pay them back eventually or risk ruining your most important relationships.

Partnering with established businesses seems like it would be a wise option, although you’d probably have to be willing to share ownership or certain rights, at least for a while. The other business would absorb some of the financial risks and help build your business’ credibility.

A new, interesting way to raise money, and not just if you’re a retiree looking to start a new business, is crowdfunding. It’s basically the concept of using social media to advertise your business idea, then ask for donations to fund it. If you reach your set goal, you pay the site a percentage of your profit; if you don’t, none of the donations go through. This is a very low-risk (and fun) way to put yourself out there, with only the risk of looking or feeling like a charity case.

There’s an Alternative if Funding a Business Just Sounds Too Risky

What if you are really scared to put more money at risk? Then consider starting a business with low or negligible start-up costs. I started this website for practically nothing in 2007. Pay $10 for a domain, a bit more for hosting and I was up and running. I was working an 80 hour week sales job too, so you definitely have time to start one after you finish applying for jobs.

Another good option would be a service business. I’ve been thinking lately about how great a pool maintenance business would be, as I see people in my area doing minimal work but charging high fees. We are talking about my neighbors paying $100, $200 every month for a pool guy to come for 15 minutes every week to make sure the water is clear. Now, I don’t have the expertise to maintain or fix pools. I wish I did because I’ve been struggling to keep my water fountain free of algae, but those who have the know-how can start this business with minimal costs.

A third option is freelancing. Plenty of companies are hiring contract or parttime workers who write, proofread, or verify facts on the content they publish. I’m more plugged into this space so I only see these types of postings daily, but I’m sure there are plenty of others in other fields waiting for someone like yourself to fill too. Almost all of these postings let you work at home even when times were normal, so you can still be trying to find work while you make some income.

Now that I’ve shared some ways for you to fund your business idea, how would you answer the question: “Are you ‘too old’ to start a business?”

Editor’s Note: I’ve begun tracking my assets through Personal Capital. I’m only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it’s much easier to figure out when I need to rebalance or where I stand on the path to financial independence.

They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it’s free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.


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