America’s idea of retirement has changed significantly over the last several years. A new Motley Fool survey indicates nearly half of Americans think of their retirement as including a continuation of work.
Some people need to keep working after retirement. Others may just not be ready to relax. They may enjoy what they do, but want to do it on a more limited basis. New retirees are increasingly transitioning from working for someone else to working for themselves.
The AARP estimates nearly 40 million people over the age of 50 are strongly considering entrepreneurship. As much as they have job skills and vital experience, they may lack the business savvy to turn those skills into successful ventures.
These entrepreneurs need advice, and they need to get it from someone they can trust. If you or a loved one are considering one of these “encore” careers, you may have a lot of concerns and may not know where to turn. FSU Credit Union can help answering questions such as:
How do I separate my business funds from my personal funds?
When it comes time to pay taxes, having a detailed record of your business costs can save you a lot. Keeping a clear account of who has paid you and who hasn’t can also be important for new entrepreneurs. Everything about business accounting is simplified by a separate business checking account.
A checking account can make a new business owner’s life easier. A single account for billing makes it easier for entrepreneurs to get paid. These accounts are also a vital part of establishing an independent business identity for tax purposes. Every business has to exist in two ways: as a service provider and as a financial entity.
Where do I go to get funding?
Starting a business costs money. Whether you need product development, market research or advertising, you have to spend money to make money. For young entrepreneurs with time to recover from loss, this initial investment is far easier to find. For retirees, though, taking on new debt can put their life’s savings in jeopardy. Using your retirement nest egg to fund the start-up costs is risky.
Taking a large portion out of your retirement fund at one time is dangerous. In addition to the risk of losing and changing your retirement plans, there’s the lost interest from moving that investment. For some retirement accounts, withdrawal limits may make taking out the start-up funds too expensive.
You need ways to manage risk. Finding a way to balance the costs from your business with your need for retirement security is a tricky proposition. Keeping costs low is a good place to start, but small business loans are an excellent way to get that initial investment. In addition, taking loans out under your business can protect family and heirs from the risk.
What do I do about taxes?
Many small business owners never consider this until it’s too late. When you work for someone else, your federal income taxes are withheld automatically. You may need to make a small catch-up payment in April to account for stock ownership, a spouse’s income or other sources of income, but they never break the bank. When you work for yourself, though, no one takes care of payments for you.
Your paychecks seem bigger because you don’t have income taxes or payroll taxes deducted. Your small business may seem to be making money, and you may use that money to reinvest in your business or pay your personal expenses. Then April comes and the IRS sends you a bill for about 30 percent of your gross income on the year. If you have good planning advice and make estimated quarterly payments, you won’t feel quite so much pain. Still, the first time one of those payments comes around, it can be unpleasant.
Starting a small business can be scary and disorienting. It takes a lot of knowledge, skill and hard work. While only you can provide the drive and ambition that’s necessary to succeed in a small business, FSU Credit Union can help with the knowledge to help control many risk factors.
*The content provided in this article consists of the opinions and ideas of FSU Credit Union, does not constitute legal or financial advice, and should be used for informational purposes only. Any decisions you make based on the information contained in this article is made in your sole discretion and liability. FSU Credit Union disclaims any damages or liability for decisions you make based on the information provided.