Self-Directed Entrepreneurship – Retiring to a New Career
Published on June 18, 2015
It’s no secret that the job market has really changed the way Americans are working—and many people who were nearing retirement a few years ago have decided to extend their work life to make up for lost income and retirement accounts that got hit hard.
A growing number of baby boomers are choosing to continue working but for themselves this time and on their own terms (sounds like our clients who self-direct their retirement plans!). According to a 2014 report by the Kaufman Foundation, people ages 55-64 are one of the fastest-growing demographics of entrepreneurs in the U.S.; in fact, they now represent nearly a quarter of all new entrepreneurs. This trend has been dubbed “encore entrepreneurship.”
Why the encore in later years?
Today’s seniors are living longer and often healthier lives and many don’t want to stop working; for them, work in some way—especially their way—gives their lives meaning; so instead of slowing down towards retirement time, they’re setting the stage for the next chapter. This could last many years, given Americans’ ever-extending lifespan.
Another reason for this serial entrepreneurship is that many baby boomers who are nearing traditional retirement age have not yet recovered from the Great Recession (not to mention, the post-9/11 pratfall the stock market took); their retirement savings and home values are still on the mend and for them, small-business ownership can be a great (and fun) way to earn additional income in retirement.
This trend of launching a business in “retirement” is growing and so are the resources to support it. There are many organizations and online sources for older adults to glean many practical tips related to business ownership. For instance, the U.S. Small Business Administration and AARP provide free online courses, webinars and mentors to help entrepreneurs over ages 50+ start or grow a business.
Secrets to self-directed success.
Just as with your self-directed retirement plan, there are three basic ways to ensure you set yourself up for success:
- Do what you know. Self-directed account holders are wise to invest in alternative assets they already know and understand; the same tenet applies to entrepreneurs. Leverage what you already know (in new ways).
- Understand the finances. Self-directed investors need to understand how the funds related to an investment must flow through the self-directed IRA; they must also make sure they are clear about contribution guidelines for their types of retirement plans. Similarly, entrepreneurs should understand what kind of financial commitments they will be making to ensure their new enterprise’s success. The SBA offers these tips for financing your business.
- Get help from professionals. Running a business is hard work and requires a lot of skills that no one person ever can have. Just as you would turn to experts in specific areas to help you get your business running smoothly (bookkeeping, legal, marketing and other support), investors must have a third-party administrator taking care of their self-directed IRA. The investor becomes the subject matter expert regarding a target investment, and the administrator provides all the backup—reporting and filing, transaction support and guidance, as we do at Next Generation Trust Services.
Launching a new business is exciting but it can also be somewhat daunting. Self-directing your retirement portfolio is similar. You have a wide array of investments to choose from, and the excitement of building an eclectic portfolio. Just as with being your own boss, you are controlling your future, with investments you’ve researched and understand. But as any successful entrepreneur of any age will tell you, you can’t do it all alone.
When you open an account with Next Generation Trust Services, you have the support of our knowledgeable professionals. They can answer your questions and expedite your transactions efficiently and correctly, and they’ll ensure you are investing within IRS guidelines.
If you’re thinking of becoming an encore entrepreneur, we wish you lots of luck. And if you are thinking of opening a self-directed SEP or SIMPLE IRA as a business owner, we have plenty of resources on our website for you.