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Why to Start Your Own Business During Retirement

Author: Matthew Williams

When you've just retired from your regular job, your first instinct probably won't be to find a way to start working again. But once some time has passed and you've decompressed, you'll need something more fulfilling to do with your days than binge-watching Scandal. One option worth considering is pursuing any entrepreneurial ideas you didn't have time for earlier in your life, when kids and career used up all of your energy.

Here are five reasons why retirement is the perfect time to start your own business.

1. There's Minimal Risk

There's a reason why so many startup founders are college students or recent grads: They have nothing to lose. There's no family depending on their income or demanding their time. They haven't yet burdened themselves with a mortgage (though student loan payments can be comparable to house payments). They're also not risking a career they've worked hard to build. In retirement, you're in a similar situation. Between your savings and Social Security, you've got your income covered, at least partially. Your kids are probably out of the house and old enough to support themselves. You've likely paid off the mortgage.

The key is to choose a business idea with low startup costs and low overhead – or to find outside investors – so you're not gambling with your nest egg. (See Top Rules of Thumb for Retirement Savings.)

For Daniel A. Willis, creating Bygone Era Books was pretty high risk, but he found ways to mitigate it. Willis worked in a variety of agencies as a civil servant for the state of Colorado for 20 years. His final role was at the Oil and Gas Conservation Commission, the state agency that regulates drilling for oil and natural gas. On the side, he wrote several books. I learned about the publishing industry as I went and saw a need for the historical genre and particularly for a publisher to assist other authors who write for specific historical niches, he says.

"I actually started the publishing company a year before I retired. We started very slowly, only releasing a handful of titles that first year. We increased the rate we were putting out books once I was free to devote full time to it."

He's put a lot into the business, which is devoted to both fiction and nonfiction books about history. And now, just past the company's second anniversary, it's starting to turn a profit, he says: Our highest seller so far is an Agatha Christie-style murder mystery." Set in 1894 South Dakota, And The Wind Whispered by Dan Jorgensen has a cast that's a who's who of the Wild West. He says it's quickly being challenged by the newly released Whispers of Liberty, a time-traveling romance by Heidi Sprouse that's set mostly during the American Revolution in upstate New York.

2. You Have Plenty of Free Time

One of the biggest challenges of starting your own business in your 30s, 40s or 50s is that you're either working full time, raising kids full time or both. It's hard to find the hours or the energy to devote to a task as massive as starting a business. In retirement, you don't have to balance the demands of your new business with your existing job; you can throw yourself into entrepreneurship full time. (For tips on getting started, see How To Write A Business Plan.)

Some people find themselves with more free time on their hands sooner than they wanted. Nick Pronovich, now 74, unwillingly retired as creative director of a large ad agency in 1999. He had written TV commercials and print ads for household brands including AT&T, Advil and PBS, and even won a Clio Award for creative advertising for his Brush Your Breath With Dentyne campaign.

I did a bit of freelance work for some of my old agency clients for a couple of years. But it was impossible to get another full-time job at an ad agency. I was too old, he says.

So he switched gears. He joined forces with his Manhattan neighbor James Weldon, a businessman and coffee aficionado who had been in the coffee business for 30 years, and an art director he used to work with, Gunar Skillins, to launch Dancing Moon Coffee, a premium brand that's small batch, single , strictly organic and fair trade. They sell their coffee on Amazon.

3. You Can Be Flexible

Maybe you don't want to throw yourself into a new business venture full time. Isn't the whole point of retirement to not be working constantly? If that's where you stand, no problem. You can put as many or as few hours into your new venture as you want. Business owners get to set their own hours, and it doesn't matter if you take a little longer to get things going and start turning a profit since your finances are already stable. You can structure your business to give yourself the flexibility to travel, volunteer or pursue other retirement dreams.

Willis says he puts in about 50 hours a week, but because he always worked lots of hours during the week, he's used to it and has created a work-life balance that works very well for him. Pronovich says he spends four to five hours a day on his company, but it keeps his mind engaged 24/7

4. You Can Make Money!

If you aren't relying on the money you hope your business will generate, any income you do earn will help you be more financially comfortable during retirement, spend a little more gratuitously or leave a larger legacy. If you're one of many seniors who don't have enough saved, self-employment can provide the boost you need. It can also help you bridge the gap between the age at which you're eligible for retirement through your employer and the age at which you're eligible to claim Social Security benefits. This was the case for Willis, who says he needs the additional income.

Pronovich says he was lucky enough to have a reasonable income from his 401(k), pension and Social Security to be able to afford not to work. He also invested very little of his own money in his business; Weldon funded the company and has handled most of the costly start-up expenses like attorney fees, trademark registration, packaging costs and public relations. So far, my out-of-pocket costs have been under $10,000, Pronovich says. Start small. And suck up to a rich friend who will finance you.

One of the reasons he started the business was to augment his retirement income, which so far hasn't happened, but the company is only six months old. I am hopeful that I will start making some money after our debt is paid off. In the meantime, I'm having such a good time using my creative brain again and working on the project that making money is secondary to me, Pronovich says.

5. You'll Stay Sharp

Starting a business will provide structure and goals for your day-to-day activities, staving off the listlessness, boredom or depression that can accompany retirement when you don't know what to do all day.

University of Michigan Economics Professor Robert Willis (no relation to Daniel), former director of the National Institute on Aging's Health and Retirement Study (HRS), and his colleague Susann Rohwedder studied how retirement affects mental cognition. They tested participants in countries with different retirement ages and found that people in countries like the United States, where workers tend to retire later, scored much better than those in countries like Spain, where workers tend to retire earlier. It seems that continuing to work helps you maintain an active mind and staves off cognitive decline. Robert Willis also found, based on HRS data, that people reported being slightly more bored after retirement than while they were working.

Another benefit of being an entrepreneur is that it gives you the chance to interact with others and develop new relationships, so you don't feel isolated.

I attend a couple of conferences a year which are for small press publishers and also go to writers events where I interact with authors on a different level than I would have as just another author, Daniel Willis says. I am always building new relationships with bookstores and distributors as well.

Pronovich says he has developed some great new relationships with people and organizations in the healthy-food subculture. Dancing Moon donates 5% of its profits to the Semper Fi Fund, incorporated in 2004, which provides financial assistance to post 9/11 wounded, critically ill and injured members of all branches of the U.S. Armed Forces and their families. Pronovich says he finds this relationship extremely gratifying.

The Bottom Line

If you decide to start your own business during retirement, you'll have plenty of company. According to a study by the Kauffman Foundation, a nonprofit with a focus on education and entrepreneurship, a growing number of baby boomers have done so over the last decade. If you retire at 65 and have an average life expectancy, you've still got about two decades ahead of you to keep accomplishing your dreams.

Have it all planned out before you retire, or at least before you spend that first dollar on it, is Willis's advice to retirees thinking about starting their own business. Work a little longer at your job if you need time to get your ducks in a row. Starting up gradually a year before retiring made the transition much smoother, both in terms of time commitment and in income, he says.

But if you're comfortable taking a little more risk or have a sizeable nest egg, it might be preferable to take a break from your old career before you launch your new one. Take that long vacation to Italy, that cruise to the Bahamas or whatever you've been dreaming of. Return refreshed – and then get going on an exciting new venture.

For related reading, see 3 Late-Blooming Entrepreneurs.

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