By: Emily Klaus | Marketing Associate
Business owners and employees alike spend much of their adult lives saving for their retirement. Everyone contributes to their 401(k)s and we all constantly worry if we have enough saved up to last through our last few decades one we stop working. However, many people are hitting retirement age and not retiring...sounds crazy, right? Actually, it’s quite common. According to a study, nearly 24% of the companies started in 2012 were founded by owners between the ages of 55 and 651, or the Baby Boomer generation. So what’s the big deal about “second act” careers? We’ve compiled a summary below of why people are choosing not to retire, benefits of “encore” careers and how to get funding for these types of small businesses.
Why not retire?
There are a couple of reasons why Baby Boomers are not as keen to retire. Perhaps they don’t have enough saved up for retirement. When the economy plunged in 2009, many 401(k) accounts nosedived, as well. For some older workers, that may have set back their retirement by a few years or derailed that plan completely. Even if their 401(k)s fared well, many cut back on their contributions because they needed to allocate that money elsewhere in the short term.
Another reason to not retire is that, thanks again to the recession, many older employees were laid off. The job market is not kind to people over 50, as companies would need to pay these employees more in salaries and health benefits. Ageism is unfortunately a factor in hiring, so knowing this, many Baby Boomers chose to be their own boss and started a business they were passionate about.
Benefits of an “encore” career
There are almost too many benefits to count! In general, “second act” business owners will be more financially stable, and therefore, more willing to take risks with their own business. They also have decades upon decades of experience in the business world and are usually savvy about what it takes to start and run a good business. These owners are also good managers and know how to work with many different types of people. These types of small business owners have also built up a vast network of contacts and have a strong professional support system in place for anything they or their small business might need.
Additionally, these types of business owners are (for the most part) out of the “growing family” stage. Most likely, they do not have children in the house anymore, and if they do, these kids are old enough that they don’t need full-time care. This means decreased familial responsibilities and the small business owner can focus more on growing and running his or her business.
How to fund a “second act”
There are a lot of different ways to fund a “second act” career, but before you start your business, be sure to take a good, hard look at your finances. Underestimating how much it takes to start a business and overestimating your retirement savings can be the biggest mistakes that an older entrepreneur can make, so it’s important to carefully evaluate just how big of a financial risk you are taking.
If you’ve been in business for at least 3 months and have at least $10,000 in monthly revenue, you may be eligible for a merchant cash advance from Jet Capital. Simply apply online or give us a call at 866-845-9674.
If you are a retired veteran, there are many different funding resources available specifically for you. To learn more, click HERE.
Retirement funds always seem to be a source of funding for “second acts” small businesses. If you are over age 59 ½ , you are able to withdraw from your 401(k) without penalty. If you choose to do this, be sure you will be able to live comfortably should your small business venture fail and you cannot recoup your initial investment.
If you are under age 59 ½, you will most likely be penalized for withdrawing from your 401(k) early. This withdrawal fee is 10%, so “cashing out $50,000 in 401(k) may leave just $35,000 in cash after 20% withholding and a 10% early withdrawal penalty”.2
Jet Capital is here for small business owners of all types. If your small business is in need of working capital to expand, purchase more inventory for the holiday season, or complete emergency maintenance, apply online or give us a call at 866-845-9674.
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