Dr. Daniel Crosby, Ph.D., President, IncBlot Behavioral Finance
Retirement is the perfect time to pursue your passions. You have the luxury of spending time on the projects that you love, and you can work because of choice rather than necessity. Matching your passions with a small business venture puts you on the path towards a fulfilling retirement experience. But, it takes careful consideration to launch a business that yields success…rather than stress.
It’s essential for retirees to follow the same steps that a younger entrepreneur would, plus a few more. Your business venture should enhance your retirement experience, not put it at risk. Keep these considerations in mind as you choose the concept and business model that’s the best for you.
- Work Income & Social Security: Understand how your income will affect your Social Security benefits. If you begin claiming benefits prior to your full retirement age, you’ll face hefty deductions on your income above a minimum threshold. In 2013, $1 is deducted from every $2 earned above $15,120.
- Tax Incentives & Burdens: Is your state or city small business-friendly? The Small Business & Entrepreneurship Council issued the “Business Tax Index 2013” and ranked the following 10 states as those with the best tax systems: 1) Texas, 2) South Dakota, 3) Nevada, 4) Wyoming, 5) Washington, 6) Florida, 7) Alabama, 8) Colorado, 9) Ohio, and 10) Alaska.
- Start-Up Capital: Every business will require resources for start-up expenses associated with business licenses, contracts and accounting. A business model with significant up-front capital expenditures likely isn’t the best choice for a retiree. Your goal is to supplement your nest egg, not tap into it.
- Small Business Resources: Savvy entrepreneurs take advantage of expert resources. Does your community have a Small Business Development Center or is there a SCORE chapter near you? Both provide access to free one-on-one business counseling from retired executives or subject matter experts in your industry.
Begin with a solid understanding of the financial implications of your business venture. Then, feel free to explore the opportunities available to you. Look for a business model that fits your lifestyle and desired activity level. Does it require full-time attention, or can you choose projects and clients as you see fit? Will you work within your area of expertise, or expand your horizons to a new industry altogether? Here are seven small business ideas for retirees:
1. Consulting: Your depth of experience has value, and consulting is a great way to monetize it. You may work on an advisory basis only, or with hands-on technical projects. Consulting can be a great platform for pursuing the aspects of the industry that you love the most while staying sharp on emerging trends.
2. Tutoring: Take advantage of schedule flexibility and seasonal work throughout the school year (or the summer). Tutoring can be particularly fulfilling for retirees who love to help others master tricky concepts or problems. Online providers offer fiercely competitive rates, but you’ll build your client base using specialized experience and personal relationships.
3. Home Health Care Aid: Combine medical care with your ability to provide companionship to clients who require assistance with everyday tasks or who are shut-ins.
4. Financial Planner: Fewer than half of all Americans have a retirement plan in place. That leaves a broad market for a financial advising. Research licensures and compensation structures carefully so that you can offer the right expertise and credibility for the market.
5. Home Services: From cleaning to handyman services, opportunities abound for providing in-home services to busy households. Consider your options carefully; while a franchise offers a set structure and turn-key marketing, the operating hours may be more than you initially wanted. Working independently offers significantly more flexibility.
6. Tax Preparation: You don’t have to be a CPA to work as a tax professional. Over one-third of tax preparation offices are run by a single person. Complete the IRS proficiency exam and register as a tax preparer. Take advantage of seasonal work peaks and then enjoy the rest of the calendar year in leisure. Keep in mind that some continuing education is required to maintain your registration status.
7. Bed & Breakfast Operator: For those who want to be fully immersed in the hospitality industry, operating a B&B offers the opportunity to put your culinary, project management and business skills to work. The Professional Association of Innkeepers International monitors the $3.4 billion industry and the 17,000 inns located across the United States. A B&B venture likely requires buy-in and partnership on behalf of your spouse; 72% of innkeepers are couples.
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