Older workers often have the necessary knowledge and expertise to start a business to gain extra income during retirement. But there are many angles to consider before you decide to run a business during your retirement years. There are financial challenges regarding the start-up funds and cash flow as well as lifestyle considerations, such as how much time you want to spend running your business. Here’s how to tell if starting a business in retirement might work for you.
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Consider the cost. Before you jump headfirst into your own business, consider the physical, mental and time costs involved. If you’re already a business owner, you might have some idea of the demands. If increasing your leisure time is a goal, you may want to consider how to keep your business running while cutting down on your time commitment.
If you’re not yet an entrepreneur, think about what type of lifestyle you want to lead as a business owner. You might want to work 10 hours a week or 40. Some people would rather have a set schedule each week, while others prefer flexible hours. Think about whether you want to work with people or be primarily on your own. Your income needs are also important. Consider whether you need to make a few hundred dollars a month or a few thousand.
Your lifestyle needs can help determine the type of business you want to begin. You might want to be able to travel while you work. For example, you could start a blog, which you can run from anywhere but could require a lot of time. Or you could start a crafting business where you work alone during the week and then interact with customers at craft fairs on the weekends.
You might need to use some of your own money to get the business started. Some businesses can be launched for just a few hundred dollars or less, while others cost thousands or more to start up. Consider how much you can safely afford to invest in the business, and don’t put any money down that you can’t afford to lose.
[Read: How Working an Extra Year Improves Your Retirement Finances.]
Consider your retirement benefits. Continuing to earn income in retirement could impact your retirement benefits. Your income might affect the size of your Social Security payments. If you are age 65 or younger and earn more than $15,720 in 2016, part or all of your Social Security benefit could be temporarily withheld depending on how much you earn. However, after your 66 th birthday there’s no longer any withholding if you earn above the limit.
Continuing to work could also make your Social Security income taxable. For 2016, your Social Security benefits will become partially taxable if your adjusted gross income, nontaxable interest and half of your Social Security benefit tops $25,000 for individuals and $32,000 for couples. If these income sources top $34,000 for individuals and $44,000 for couples, a greater share of your Social Security benefit, but not all of it, will be taxed. If you continue to work after signing up for Social Security, remember to determine just how your earnings will affect your Social Security income during retirement.
[Read: How to Solve 5 Common Social Security Problems.]
It’s about your preferences. Whether or not you should run a business in retirement depends on a variety of factors. If you have substantial retirement savings and don’t need loads of extra income, a business that takes just a few hours a month could be a fun hobby. But if you want to continue working full time at something you love, consult with a financial professional. In some cases you might come out ahead by working at your business full time for a few years, and putting off retirement until later.
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How to Decide If You Should Run a Business in Retirement originally appeared on usnews.com
