Why Being 50 (or Older) Is Just Right for Entrepreneurship

Entrepreneur, Investor, Author, Philanthropist
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Some older entrepreneurs are figuring out how to draw from retirement savings to finance the business of their dreams.

Jim Butenschoen, left the IT industry to start a hair-design academy in Arkansas. Randal Smith, exited the corporate world to open an optical retail business in Missouri with his wife.

Contrary to popular belief, entrepreneurship isn’t just for 20-year-old kids writing code in their college-dorm rooms. According to the Kauffman Index of Entrepreneurial Activity: In 2012, almost a quarter of new businesses were started by entrepreneurs 55 and older, a spike from 14 percent in 1996.

Related: Think You're Too Old to Be An Entrepreneur? Think Again. (Infographic)

And while twenty-somethings may have the edge when it comes to being willing to stay up all night eating takeout pizza while working, older entrepreneurs bring formidable advantages: broad and deep knowledge built up from years in the workforce. Plus, some older entrepreneurs have management experience and large professional networks.

Not everyone older than 50 finds the prospect of entrepreneurship appealing, though. The financial uncertainty can be too much to stomach and the amount of work involved in a business launch is substantial. But business ownership promises a level of autonomy and fulfillment that can’t be had otherwise. The MetLife Foundation reported in 2011 that 25 percent of baby boomers surveyed hoped to start a business or nonprofit within five to 10 years. 

Indeed the Arkansas hair design academy and the Missouri optical store came about after clients of my firm, Guidant Financial, in their 50s and 60s decided it was the right time for them to turn their passions into their livelihoods and become entrepreneurs.

Related: The Other Startup Generation

Jim Butenschoen, 65, of Springdale, Ark., was fed up with the corporate world after spending more than 20 years in the IT industry and wanted to go into business himself. Eight years ago, he opened the Career Academy of Hair Design starting with six employees. Now he has 32 at four establishments.

“Despite all the ups and downs, I have never done anything more satisfying,” he says. “I wake up so satisfied and secure. Every day has more challenges and hurdles, but they’re my challenges and hurdles." Though some people his age retire, he says, "I don’t want to stop working because I’m having so much fun.”

Eyeing a new venture.  After working for 30 years in the optical industry, Rand Smith decided to go into business on his own with a trusted partner, his wife, Janeel. The Smiths, both in their 50s, tapped their retirement funds. Two years ago, they opened eyeSmith Sport & Fashion Optical, a high-end optical store in Kansas City, Mo., that sells prescription fashion and sport performance eyewear.

“Rand was tired of the corporate bologna," Janeel says. "It’s been so much fun to get up every day and go to work because we determine what’s important: our clients.”  

Transforming a hobby into a livelihood. These over-50 entrepreneurs turned their passions into second careers and couldn’t be happier. For those dreaming of turning a hobby into a living, or longing to be their own boss after years of working for others, a second career as an entrepreneur be a viable solution.

Those with ambition and drive to start a business but lacking a pile of money should not become discouraged. Startup capital can be raised in a variety of ways. Small Business Administration-backed bank loans are a good place for new business owners to start. Not all entrepreneurs will be approved, however. Those unable to raise sufficient funds should be wary of taking on debt and instead might consider alternative financing.

Related: Should You Tap Your 401(k) to Start Your Business?

Butenschoen and the Smiths financed their businesses using retirement savings through a method referred to as rollovers as business startups or ROBS. With these rollovers, individuals can use money from their IRA or 401(k) account to invest in a business of their own without incurring any tax penalties for early withdrawal. For aspiring entrepreneurs who are cash poor but have substantial retirement savings, this can be an ideal way to finance a business without taking on debt. The IRS rules for these transactions are complicated, though, so work with a qualified firm.

Some individuals invest their retirement assets into a business believing this will diversify their financial strategy in placing some of their assets outside the stock market. The business provides an ongoing retirement benefit to the business owner; and the capital can be used without taking a taxable distribution or assuming a loan. Without having loan interest to pay, people can make money sooner all while launching a business of their dreams.

Related: How Small Businesses Can Ease America's Job Shortage

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