Small business ownership is on the rise for Baby Boomers. One reason is backed up by 2016 research reporting that of 1504 Boomers interviewed, 56% reported having no or less than $50,000 retirement savings. Coupled with a comprehensive 2011 study showing only 55% Boomers have retirement savings, and a booming 42% having scrapped together less than $100,000, statistics show about half of retirees are living off their social Security benefits.
New Age of Ambition.
Boomer Business Bonanza is one description of the phenomenon created by nearly 70% of retirees 50 years and older that started their own businesses. Whether their decision was to make extra spending money, supplement Social Security or top off lean retirement funds before reaching age 70, Boomers are doing it on their own terms.
The light of reality.
Several of my over-50 clients have stepped into small business ownership for the first time. Boomers’ lifestyle as young adults is often described as a free-spirited experience that defied rules and structure. Not so their approach to business ownership as they micro-manage their structured, goal-oriented plan while leaving plenty of leeway for free time for fun. Their stories create this composite Boomer experience:
Tom and Carol’s grand plan for small business ownership.
Tom, age 63, and Carol who still works at age 57, came to me after Tom’s corporate position was eliminated. He always thought he’d work to 65, receive “the gold watch” and kick back. Both were as unprepared for this early retirement experience as they were for the cultural revolution of their youth.
The couple faced the dilemma of cutting back expenses and living off Carol’s earnings, or Tom returning to the work force. They found both choices unacceptable, and decided to start a consulting business drawing on Tom’s 30-plus years in marketing and Carol’s graphic design talents. She would also continue her “day job” and pay into Social Security, Medicare and her company-matched 401k.
The business start-up.
Tom and Carol had done their business start-up homework, and were confident with the results. However, they had found little information on unique issues facing “almost retired” owners. They wanted their business set up to:
- Allow Tom to fully fund an IRA for himself each year, and if Carol were to lose her job, allow her to also set up an IRA;
- Allow the business to pay various health insurance, long-term care and possibly other insurance premiums;
- Shift a portion of their household expenses to the business through the use of a home office;
- Establish quarterly checkpoint reviews which would provide them a “no surprises” tax experience;
- Provide the business with a specific exit strategy to take them to a sale or closing of the business at the right time, and to keep safeguards in place in the event of health emergencies or other unexpected events; and
- #1 on their list, which they insisted be last, was that their business must be fun, and offer flexibility and freedom. As with many of my over-50 clients, Tom and Carol reminded me they didn’t mind working hard; that if something was worth doing, it was worth doing right.
The business team meeting.
Together with one of our team accountants, Tom and Carol and I met for an in-depth research and planning session. This gave my clients the chance to further explore their expectations, and for my accountant and me to fully understand how to best structure their business to meet these goals.
Tom and Carol knew what they wanted to accomplish, and the goals they set for their business were realistic. They were also willing to acknowledge the fact that they didn’t fully understand how to make it happen. In this case, some of their business suggestions would not have kept them on course, and could have actually taken them off track. They were both eager to learn about other options to better meet their goals. They were also pleased that the team accountant would be their accountant, readily available by phone, email or secure portal. Together, we all moved forward to set up the new business, which has a really great name and logo, thanks to Tom and Carol’s lifetime of experience and learning.
Small business ownership was easier than either Tom or Carol realized; and they admitted later if they known it was so much fun, they would have gotten older sooner. We all laughed at that one!
The bottom line.
Tom and Carol came to us with a problem, an idea and a goal. They were anxious to brainstorm for the right solution and move forward. We did it together; and Tom and Carol are now successful business owners.
We can do this for you, too.
Melanie Radcliff CPA, Inc. is your solution to obtaining your business goals.
Call 479-478-6831 or send us an email.