The way we think about retirement is changing. For years, many people saw retirement as a chance to relax and unwind after years in the workforce. Retirees planned to see the world, work on their bucket lists, or spend time with friends and family.
The State of Retirement Planning study by Fidelity Investments found that more than half of future retirees now plan to start a business when they retire, and two-thirds plan to do a phased retirement, where they work part-time for a few years before completely retiring.
Why are so many people planning to start a business just as they exit the workforce? There are several science-backed benefits to starting a business after retirement.
Supplement retirement income
Starting a business in retirement can provide an additional stream of income, which can cover living expenses and allow you to invest your retirement income, travel more, or pay for new hobbies.
If you’re just starting in retirement, income from a business can also provide a cushion for later medical costs. According to the National Library of Medicine, nearly half of all medical costs occur during your senior years. Income from a business can help with expenses not covered by Medicare.
Protect yourself from market volatility
Ideally, retirement investments move from higher-risk investments like stocks to lower-risk investments like bonds and mutual funds as you get close to retirement. However, market volatility can still impact your retirement income.
Business Credit Card Comparison
Consider these business credit cards that offer a convenient and efficient way to separate personal and business expenses, simplifying accounting and tax reporting.
Additionally, business cards can provide valuable perks such as rewards points, cashback, and expense tracking tools, enhancing financial management and the potential to help save money in the long run.
Ink Business Unlimited® Credit Card |
Earn $750 bonus cash back Earn $750 bonus cash back after you spend $6,000 on purchases in the first 3 months from account opening. |
Earn unlimited 1.5% cash back on every purchase Earn unlimited 1.5% cash back on every purchase made for your business |
Purchases: 0% Intro APR on Purchases, 12 months Balance Transfers: N/A
Regular: |
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Ink Business Preferred® Credit Card |
Earn 120,000 bonus points Earn 120,000 bonus points after you spend $8,000 on purchases in the first 3 months from account opening. |
Earn 3 points per $1 in select business categories Earn 3 points per $1 on the first $150,000 spent in combined purchases on travel, shipping purchases, Internet, cable and phone services, advertising purchases made with social media sites and search engines each account anniversary year. Earn 1 point per $1 on all other purchases-with no limit to the amount you can earn. |
Purchases: N/A Balance Transfers: N/A
Regular: |
Relying on a business’s cash flow can help you weather the market’s ups and downs by not pulling out funds when the market falls. (Just make sure you meet the minimum distribution rate based on your age.)
Staying mentally fit
Many of us think about staying physically fit as we age, but mental engagement is important, too. Starting a business is a challenge that can keep your brain sharp, provide opportunities to socialize, and reduce isolation.
According to Dr. Jessica Caldwell, a neuropsychologist at Cleveland Clinic’s Lou Ruvo Center for Brain Health, isolation and loneliness are risk factors for dementia. The challenges of starting a new business are actually good for your brain.
Potential tax benefits
Most sources of retirement income are taxed, but running a small business can offer tax benefits in some cases. For example, if you work from home, you may be able to write off part of your home as a work expense. Other expenses, like gas, travel, and business software purchases, can also provide tax write-offs that lower your tax liability.
Build new relationships
Retirement is an important milestone in life, but it can also lead to a loss of sense of self. Who are we when we don’t have to clock in? What is the purpose of our lives when we’re not delivering projects and solving problems?
Starting a small business requires building new relationships with customers, contractors, co-workers, and suppliers. Engaging in conversations and building new friendships can reduce feelings of social isolation and depression.
Starting a business in retirement offers the opportunity to pursue passions and interests that you may have set aside during your career-building years. It also offers significant financial benefits and can help foster an overall sense of well-being.
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