If your vision of entrepreneurs is a group of young people in hoodies packed into a converted garage, you may want to prepare for a visionary realignment. America is getting older demographically and the workforce is aging along with it. In a trend that’s now over a decade old, America’s newest entrepreneurs are over fifty and many are sixty-five and up.
There are a lot of names for the trend, like "seniorpreneur," but I prefer the term encore entrepreneur. According to the the Kauffman Index of Entrepreneurial Activity, in 1996, entrepreneurs age fifty-five to sixty-five made up 14.3% of the total. By 2012 that number had risen to 23.4%. What’s more, many older Americans are raiding their IRAs for the money to fund those new startup businesses.
While younger people may have more capacity for putting in longer hours, the encore entrepreneur brings a lot of experience to the table. Years in the working world have given older entrepreneurs broad knowledge about how business works. According to surveys, nearly a quarter of seniors are thinking about starting their own business in the next three to five years. That trend holds true in Canada as well, where even a more generous social safety net does not dim the desire to run a business. Nearly a quarter of Canada’s new small businesses are started by seniors driven by the desire to keep working, building and achieving.
For those in their fifties, entrepreneurship provides working security. While the entrepreneurial lifestyle presents challenges, so does trying to find a new career path in your mid-fifties. You can put all your effort into finding another job and end up giving away food samples at Costco, or you can put that effort into building a business of your own. Granted, there are no guarantees either way, but nevertheless more seniors are betting on their innate ability to make a go of it.
Turning Hobbies Into Money
For many seniors starting a business is a way to turn something they enjoy doing into a way to make money. Financing through your retirement account is possible, even if you’re under the age to make tax-free withdrawals through a mechanism called ROBS, or Rollovers as Business Startups. Basically your retirement account rolls over to a retirement account that holds your new business. Using a ROBS to fund a new business neatly avoids tax penalties while providing needed funding for the new company.
Using a ROBS is not without risk and you should work with a tax professional to make sure yours is properly structured. There is the possibility of losing your retirement money and such arrangements can also draw the scrutiny of the IRS. A wise course is to learn as much as you can about running a small business before launching out in one. Many states have special programs and resource centers for new business owners because states know that small business is where job growth really comes from.
Running an encore business isn’t for everyone but, if you have a 401(k) or IRA and your startup costs are reasonable, the government may have a way to help you get into business. Beyond that, your state may have a program to help train you how to run it.