Are You “Too Old” To Start a Business?

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I read an article recently that detailed the story of a retired Florida couple who used their personal savings to start their own business. In their case, it was worth the risk, since they’re now preparing to open their third location and are earning full salaries.

This type of move might seem unsafe, especially for those who live on fixed incomes or only have savings in the form of their 401K or IRA. But despite all the financial red flags, studies show that about 35% of new businesses were launched by people over the age of 50.

Since these people aren’t in their prime, and may not be able to recoup their losses as easily, this sounds like a risky venture. With so many losing their jobs these days, you too, may want to start a business but hesitate to put in the capital necessary to get the venture off the ground. I can just imagine the thoughts racing through your head. What if you lose the much needed savings you have left? What if the business does decent enough that you linger on but you end up wasting all your time when you could’ve instead found a job that paid much more?

Are you too old to start a business? Why are so many people choosing to start one?

You Don’t Have to Give Up Looking for Work

With recessions and sluggish markets, employers are drastically cutting job postings. And there’s definitely no lack of competition for the job offers with the unemployment rate already at 20%+. It’s no secret that it can be hard to land a job when you’re competing with a younger, more energetic, and more adaptable workforce. That’s why many eventually give up and try their hand at business ownership.

Luckily, the decision to find fulltime work or start a business isn’t an either-or.

Without that 40+ hour workweek, you have plenty of time to look for a job and still be able to put in the work to start a business. Use this window of opportunity to get that business idea off the ground.

How to Fund Your Business Venture

That sounds great, but where do you get the money?

You can’t withdraw from your retirement accounts without early withdrawal penalties. You may not want to either since doing this puts your future income at risk. Unfortunately, there aren’t many ways to get around the rules. Due to the pandemic, you can theoretically withdraw $100,000 from your IRAs without penalty, but still, you need to pay taxes on that withdrawal and you are giving up years of tax-deferred gains.

There is also a way for retirees to use retirement funds for business expenses, but it’s extremely complicated and easy to get penalized by the IRS if you don’t do it right.

Instead, many retirees are using one of the following ways to fund their new business ventures:

  • Personal savings
  • Small business loans
  • Loans from family or friends
  • Partnerships with established businesses
  • Crowdfunding or crowdlending

Using personal savings to fund a new business is a personal risk, though at least you wouldn’t be ruining your credit or risking bankruptcy. But, in the event the business fails, you won’t have an emergency fund.

Small business loans can be hard to get when you’re retirement age because you’re considered more of a risk. Getting approved is possible, but you’d have to provide more than just a business idea; you’d have to prove your business can make money, and fast.

Loans from family and friends would take away some of the pressure that comes with a formal loan, but you’d still have to pay them back eventually or risk ruining your most important relationships.

Partnering with established businesses seems like it would be a wise option, although you’d probably have to be willing to share ownership or certain rights, at least for a while. The other business would absorb some of the financial risks and help build your business’ credibility.

A new, interesting way to raise money, and not just if you’re a retiree looking to start a new business, is crowdfunding. It’s basically the concept of using social media to advertise your business idea, then ask for donations to fund it. If you reach your set goal, you pay the site a percentage of your profit; if you don’t, none of the donations go through. This is a very low-risk (and fun) way to put yourself out there, with only the risk of looking or feeling like a charity case.

There’s an Alternative if Funding a Business Just Sounds Too Risky

What if you are really scared to put more money at risk? Then consider starting a business with low or negligible start-up costs. I started this website for practically nothing in 2007. Pay $10 for a domain, a bit more for hosting and I was up and running. I was working an 80 hour week sales job too, so you definitely have time to start one after you finish applying for jobs.

Another good option would be a service business. I’ve been thinking lately about how great a pool maintenance business would be, as I see people in my area doing minimal work but charging high fees. We are talking about my neighbors paying $100, $200 every month for a pool guy to come for 15 minutes every week to make sure the water is clear. Now, I don’t have the expertise to maintain or fix pools. I wish I did because I’ve been struggling to keep my water fountain free of algae, but those who have the know-how can start this business with minimal costs.

A third option is freelancing. Plenty of companies are hiring contract or parttime workers who write, proofread, or verify facts on the content they publish. I’m more plugged into this space so I only see these types of postings daily, but I’m sure there are plenty of others in other fields waiting for someone like yourself to fill too. Almost all of these postings let you work at home even when times were normal, so you can still be trying to find work while you make some income.

Now that I’ve shared some ways for you to fund your business idea, how would you answer the question: “Are you ‘too old’ to start a business?”

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{ read the comments below or add one }

  • Buyside Hustle says:

    Best way to start a business is to work full-time and develop the business on the side. Every day work on the business for ~30 minutes and you will be surprised by how much you have done over the course of a couple years.

    Problem is most people would rather watch 1-2 hours of TV every night instead of working on some side business.

    • David @ says:

      Ha I’ve been watching 1-2 hours of TV every night for the past month so this fits me to a T. I’ve been hard at work for this site these days, Still, those 60 hours spent (2 hours x 30 days) probably could’ve made my website much better!

  • Papa Foxtrot says:

    You are never too old to start a business. In fact, statistically speaking, you are more likely to make a successful business after 45.

    • David @ says:

      I never knew that people who start a business after 45 are more successful Papa Foxtrot.

      Since I recently started writing again, you could say that I’m starting a business “again”. I’m just 40 though. Should I wait and start in another 5 years? j/k

      Kidding aside, you are right. It’s never too late!

  • Beau W. says:

    Good idea for a blog post. I don’t think you can be too old for starting a business.There are plenty of things you can open a business too serve or supply what someone wants or needs. Im in my late 40s and do concrete work as a side business. Respectable work that pays well.

    • David @ says:

      That’s awesome to hear Beau.

      Where do you live? Maybe I can ask for you to help me with tiny concrete jobs around the house and then I can help you with building that website!

      • Beau W. says:

        I live in Phoenix Az. Any concrete work for you would be a pleasure. If you could build me a website as good as what you have here sir.

      • Beau W. says:

        One of the perks of concrete work. You can barter or trade for work. Im doing a job for a mechanic friend of mine for a 80,000 mile tune up on my car. Fair trade for both of us.

        • David @ says:

          Nice. Bartering is really the way to go. If you think about it, bartering is like a more fulfilling part-time job. I don’t know (and don’t want to know) how much I’ve already spent on car maintenance through the years. I bet it’s somewhere in the thousands. That sum sure would be helpful right now!

  • Joe on the Move says:

    Oh man, you make a good case to start a side business. Are you saying I’m just lazy?

  • Fire Cracker John says:

    Never too late is right!

    I wouldn’t get money from family and friends though. If you aren’t successful, you can’t pay them back and it’s bad. And if you succeed, then they will want a bigger piece of the action than they deserve, and that’ll be bad too.

    You just don’t need that. Bootstrap your way at the beginning and you will thank me later.

    • David @ says:

      Bootstrapping is always good.

      And you are right about asking family to help out. It could work, but you need to know your family dynamics well and trust that things will work out whether or not your business makes it first before proceeding.

  • Rob Misheloff says:

    Ray Kroc was 57 when he started McDonald’s…. it’s never too late.

  • Quincy says:

    I don’t think that you are ever to old to start a business. In the Netherlands a lot of people have lost there jobs, and the fact that many slightly older people are competing with younger prospects makes it more difficult to land the job.

    To start a business does take a lot of courage, a good business plan and funding. Since the crisis banks are not eager to provide loans, so smart thinking is crucial.

    The points as mentioned above from phil are good to keep in mind. In the Netherlands the government has several options where you can start a business while keeping your unemployment check for a certain amount of time.

    This will give people a certain amount of time to get there business of there ground, while not have to worry about have to pay for the monthly costs.

    However once you are making a certain amount of profit, this will get settled with the unemployment check.

    • David @ says:

      Allowing people to keep their unemployment check while starting a business is an amazingly clever idea. This way, the incentive is to create income right away instead of the usual unemployment system where they discourage you to look for even part time income while you are unemployed.

  • Marie @ My Personal Finance Journey says:

    For me, it’s never too late to start a business even if you’re old already, as long as you have goals and want to try different ventures. But you shouldn’t use your retirement fund to start a new business, you can use your personal savings or you can try to borrow from your family.

  • Marie @ My Personal Finance Journey says:

    It’s nice to hear that oldies can start their own business. At least their retirement fees were used in a nice way. In fact, they can formulate exercise with their business too rather than staying at home and sitting.

    • David @ says:

      Cashing out retirement funds to start a business definitely isn’t for everybody, but it could work for some.

      I would start by seeing if there are other ways to get funding though, such as a small business loan or crowd-sourcing etc. You don’t want to jeopardize your retirement for something that may not pan out!

  • Alex @ Credit Card XPO says:

    I applied for a business credit card that offered 0% apr for 6 months to fund my first business 10 years ago. It was definitely a risky move so I’m glad it worked out ok. =)

    • David @ says:

      Wow that’s gutsy. Nice move, as you are obviously still on top of things after a decade!

      Those 0% balance transfer cards could be dangerous, but it’s amazing what people can do with an interest free loan.

  • John @ Frugal Rules says:

    It’s great to see that retirees are starting their own businesses. I was about 37 when I started mine and I felt that I was too old, but that was really just a feeling more than anything.

    • David @ says:

      37 is definitely not too old. You’ll still be well under 50 when you celebrate the 10th anniversary of your business!

  • Phil says:

    Great story, and I want people of all ages and stripes to consider starting their own business.

    That being said, I really am concerned about someone losing their lifetime savings starting the business. It is important to not make any rash decisions or “bet” more money than you could lose.

    Here are my considerations before starting a business:

    1. Start small.
    2. See if you can find or make money for your business other than borrowing from your retirement.
    3. Have an exit plan, and know how much you can recoup if your business does not work.
    4. Have a good business plan moving forward. Learn as much as you can.

    My goal is to save $20,000 to start my own business. I am ready and willing to lose it all. As a school teacher, this is significant money for me. But I will not dip into my retirement, or even stop contributing to my retirement.

    • David @ says:

      Starting small is a great idea. It’s important to test the business model out to make sure it’s a good fit first.

      And Phil, do you already have an idea you want to pursue when you manage to save $20,000? If so, could you do any ground work before you reach the savings goal?

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