A growing number of older Australians are ditching the traditional retirement routine in favour of starting a business venture – a movement known as seniorpreneurship – and with 34% of all startups being headed by people with an average age of 57, it’s safe to say the movement is strong.
The reasons for becoming a seniorpreneur may vary. For some, the desire to go it alone may have come off the back of a redundancy and a lack of employment options. For others, the goal might be to earn enough to become financially independent in retirement, or it could be more of a lifestyle choice. Work can give us a sense of identity and purpose and many of us aren’t quite ready to put to bed a lifetime of skills, expertise and networks.
Whatever the driving forces behind the decision, there’s a great deal to think about when it comes to jumping into the world of seniorpreneurship.
What type of business you choose is limited only by your imagination, but here are a few things you should consider if you’re thinking about a foray into the world as a senior entrepreneur:
Startup vs lifestyle business
There’s a big difference between a startup and lifestyle business. A startup’s job is to grow big enough to provide a return to investors. A lifestyle business’ job is to provide a great quality of life to its owners.
If your goal is simply to earn enough to allow you to be financially independent in retirement, there is little point racking up huge debt to fund the venture. Before you jump in with both feet consider your current financial position:
- How much do you need to ‘earn’ to maintain a comfortable retirement?
- How much can you earn before you impact any Government entitlements you may be getting or could be eligible for in the future?
- What will be the best strategy for your Superannuation payout?
There are a range of calculators, such as AMP’s Retirement Simulator, that can help you figure out how much you need in retirement per year, and how long your funds will last.
Are you good at budgeting?
Running your own show calls for careful money management. Being self-employed may allow you to earn a good living, although the flow of money may not be regular. A common mistake for start-ups is failing to set aside money for income tax and Goods and Services Tax (if your business is registered for GST). Failure to meet your tax obligations each year could result in hefty fines and a dent in your retirement savings.
It’s also important to make sure you have enough money set aside for super contributions. When you work for yourself it’s up to you to provide for your retirement income. If you are self-employed you can also claim a tax deduction for your super contributions.
It’s important to remember that if budgeting is not your forte, this this will be magnified when you’re self employed.
Financing your venture
While a lot of seniorpreneurs may have had the opportunity over the years to accumulate financial capital, for those who need that little bit extra there are a number of strategies you can use to fund your new venture, such as redrawing on your mortgage or taking out a small loan. Alternatively, there may be grants available.
Remember, the idea of setting up a small business at this stage of your life is to provide for the luxuries of life, not to earn enough to repay debt! There are many things to take into account when considering life as a seniorpreneur so it’s worth seeking guidance from a financial adviser to receive the right advice.
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