Many older workers worry about retiring and losing the income they're used to. Others worry about not having enough to do with their time in the absence of an actual job. If you're in a similar boat, you may be thinking of starting a business once you're ready to retire. And while doing so may be a good idea, you'll want to avoid the following pitfalls that could make you regret that decision.
1. Not having a specific plan
This mistake isn't limited to retirees. Many people who start businesses jump in because they're excited by the idea of running their own show and making money without having to report to a boss. But if you don't spend the time to map out a business plan, you may find that your venture is an overwhelming failure.
Rather than run that risk, contemplate the following:
- What are my goals in starting this business?
- What will make this venture a success?
- How much time will I spend running this business?
- Can I do this alone, or will I need help?
These are only a few of the questions you should ask yourself, but the key is to let logic, not just enthusiasm, dictate the actual decisions you make.
2. Sinking too much money into your business
It often takes money to make money, but when you're retired, you may only have so much cash at your disposal to pump into your venture. And if you go overboard, you'll risk struggling financially as you adjust to life on a fixed income.
Before you start funneling money into your business blindly, map out a budget that accounts for your various living expenses, including healthcare, hobbies, and travel. Then, see how much you can afford to spend getting your business off the ground.
Remember, you don't necessarily want to raid your retirement plan to fund that venture (or at least not too substantially), because the money that sits in your IRA or 401(k) can continue to generate investment growth for you as a senior. Of course, taking out a small business loan may be an affordable option worth pursuing, but the key is to crunch numbers before racking up debt or spending money you may not be in a position to part with.
3. Not having your spouse or partner's buy-in
If you're single in retirement, the amount of time and money you spend on your venture is your business alone. But if you're married or have a partner, you'll need to make sure you're both on the same page with regard to finances and a time commitment. Specifically, you'll need to make sure your significant other is comfortable with the amount of money you spend to start your business, especially if you're joint account holders.
But don't neglect the second component. Your spouse or partner may have a certain vision for what your time together in retirement will look like, and that vision may not include you spending 28 hours a week in an office or workshop. Have an honest discussion so your venture doesn't become a source of relationship strife.
There are plenty of good reasons to start a business once you retire, but before you do, keep the above points on your radar. That way, you're more likely to be happy with that decision in the long run.