The proportion of senior citizens in America who identify as bosses is gradually increasing. More than any other age group, 18.4% of workers 65 years of age and older are self-employed, according to the U.S. Census Bureau. Many Americans who are retired continue to work, often as independent contractors.
A lot of people who wish to start a small business after retirement use their interests as a springboard. These are a few strategies for monetizing your pastime into a lucrative retirement income.
Mark Holtzman, retired sales manager turned aerial photographer. Source: Mark Holtzman
How to make money in retirement
Retiring from your career doesn’t mean the end of your earning potential. In fact, it can be time to pursue a money-making passion.
If you have worked for the majority of your adult life, you probably possess a solid foundation in business and career-related knowledge. You most likely also engaged in a variety of pastimes that gave you a great deal of joy. Your priceless life experiences have also probably contributed to the development of your remarkable soft skills, which include critical thinking talents as well as superior verbal and writing communication, teamwork, and leadership capabilities.
These factors can come together in retirement to form promising money-making opportunities. Applying your vast experience, knowledge and skills to a hobby you enjoy can help you create a thriving side business that brings even greater fulfillment to your retirement years.
What are the benefits of turning your hobby into a side business?
When launching a firm, retirees could have additional obstacles to overcome that they did not experience as younger entrepreneurs, such a more constrained monthly budget. However, there are some advantages to converting your pastime into a side gig after retirement, such as the following:
1.There is little initial cost involved in converting a pastime into a side business.
The acquisition of investment money might provide difficulties for business owners of all ages. On the other hand, you probably already have all the tools and knowledge required if you’re a retiree looking to launch a business around your passion. There won’t be any initial expenses for your hobby-based side business because you may use the tools, supplies, and experience you already possess.
2.Starting small is an advantage of converting a pastime into a side company.
There’s no obligation to launch a corporate dynamo when launching a retirement-based side venture. You may not need to spend a lot of money on supplies, tools, or storage space, depending on the pastime you’re into. You may scale your business even if you are a product manufacturer such that your capacity to produce does not outpace your capacity to hold surplus inventory. Hobby-based enterprises are simple to start small and allow you to manage your growth.
3.Working from home is an option when you convert a pastime into a side company.
Regardless of when you choose to retire—on time or early—you probably don’t want to drive to work every day and deal with the stress that comes with it. It makes perfect sense to work from home when launching a side business in retirement. Due to the lack of an office lease, additional utilities, or parking fees, your home-based business will have minimal overhead expenditures.
4.Creating a side company out of a pastime allows for flexibility.
You have a ton of options when you launch a retirement-based hobby company. You set your own hours for yourself. To market and sell your products and services, for instance, you might open an online store while concentrating on refining your offers. It’s not necessary to establish strict guidelines or follow a 9 to 5 timetable.
How do you choose a hobby to turn into a business?
Occasionally, you may have an obvious pastime that would become a great business. Let’s take an example where you have always been an expert sewer and clothes designer. Under these circumstances, you might wish to open a clothes store. It’s not always as clear to combine a pastime with a business concept, though. The following advice can help you decide which pastime to pursue as a business:
- Think about the things you enjoy doing that make you happy.For instance, perhaps you like going through old photos, investigating your family history, and finding out about long-lost ancestors. You may make a side income from your interest in genealogy by helping individuals build their family trees or by assisting them in chronicling the lives of their ancestors.
- Take a careful inventory of your hobbies. Don’t overlook something if it doesn’t fit the traditional definition of a hobby. Think outside the hobby box. A hobby is anything you enjoy doing. Find that skill or talent, match it with something marketable, and you’ve got a great start for a small business.
- Consider something you’re really good at. For example, perhaps you love problem-solving and are obsessed with crossword puzzles or brainstorming new product ideas. While problem-solving isn’t a traditional hobby, it’s a crucial skill for building a profitable business.
Here’s an example of someone who successfully launched a business using their problem-solving abilities. After retiring, Linda Nagamine used her problem-solving abilities to assist individuals find their keys. She spent 28 years working as an airline customer care representative. Nagamine created the Joyful Keyper, a straightforward tool that keeps keys safe but within reach in a handbag or backpack.
Linda Nagamine created Joyful Keyper after she retired to make it easier for ladies to find their keys in their handbags more quickly. Linda Nagamine is the source.
“My everyday issue of looking for my misplaced keys was not effectively resolved by anything available in the market,” Nagamine said. It ought to be dependable and useful to everyone. I didn’t want my life made any more difficult by another gadget or technological item.
Joyful Keypers by Nagamine may now be purchased online and at women’s stores.
What hobbies can make successful businesses?
These are some instances of pastimes that might be profitable ventures. We’ve covered how to merge different interests or hobbies into viable small enterprises, as well as how to adapt different pastimes. You choose the parameters for your side project, so have fun coming up with ideas for your hobby-based business.
Woodworking
Many retirees enjoy hands-on activities like woodworking. While this can be a relaxing pastime, it can also become a lucrative business. It’s also an easy hobby to match with other hobbies to create a unique endeavor. For example, suppose you’re into woodworking and love to play chess. In this case, you could combine these two passions to start a business that produces customized chess boards and sells them online.
Outdoor activities
Numerous outdoor pursuits have the potential to generate revenue. Let’s take an example where you have a strong desire to give back to your community and you enjoy fly fishing in your own time. You may start a rehabilitation program for injured soldiers, as Ed Nicholson’s Project Healing Waters Fly Fishing accomplished.
A hobby like fly fishing could be a way to help others. Source: santypan/Shutterstock
Writing
If you enjoy writing and are good at it, you have numerous options for business ideas. For example, you can start a blog:
- Write entertaining blog posts about your life experiences or travels.
- Provide younger parents with firsthand advice about raising children.
- Share your homemade recipes and specialties.
If a blog doesn’t appeal to you, consider writing a book:
- Write a business book in which you share your corporate knowledge and experiences.
- If you are an entrepreneur with success stories to share, write a history of your firm.
- Record your life experiences and travels in a book.
- Write a book about any subject you’re passionate about. (You can even write a book about your hobby!)
Photography
Earning a steady income as a photographer can be challenging. However, you can create a business by putting a unique twist on your photography skills, what you photograph and how you take those images.
Here’s a great example: Mark Holtzman turned his love of aviation and photography into a successful aerial photography business. Holtzman began pursuing photography as a hobby when he was working as a sales manager for an auto dealership, flying on weekends and shooting with his film camera.
Holtzman’s side project eventually turned into his full-time job and produced an award-winning image that appeared in Vanity Fair and The Wall Street Journal, among other magazines.
How to Make Money in Retirement – business. pro
Holtzman also did something every aspiring, retired entrepreneur should consider: He recruited help from his kids. Holtzman’s son Steven joined when the side business became a full-time gig, helping his dad with various computer and technical issues.
“When we talk about if he’ll ever retire, he gives me this look that says, ‘I’m already pretty much retired,’” Steven Holtzman shared. “He loves what he does, since he gets to fly around and take pictures, and doesn’t see himself ever really retiring.”
Teaching
While teaching isn’t exactly a hobby, if you have the right communication skills, you can turn any hobby or skill into a successful business by teaching it to others. For example, if you’re an excellent golfer, consider offering golf lessons to members of your community. Similarly, you could teach people how to play a musical instrument, speak another language, knit, cook, paint – the list goes on. As a bonus, many skills can be taught online, opening up a broader customer base.
Is it better to run your business as a part-time or full-time gig?
You don’t want to give up the independence and leisure that retirement provides, even if you want to turn your pastime into a company. Our hobbies are free activities that we engage in whenever we feel like it. You have to deal with deadlines, clients, shipping, emails, payments, and more while running a hobby turned company. Nobody wants to revert to “the thing I used to love doing” as their pastime.
A business requires considerable mental, emotional and physical effort. To ensure your new venture doesn’t turn into an all-consuming business, consider your current retirement life. Questions like these will help you decide whether you want to go full-time or part-time:
- How much time do I want to invest?
- How much extra revenue do I need?
- What effect will my business have on my work-life balance, or the amount of time I spend with friends and family?
- Will my initial expenses be prohibitive?
- Do I have other commitments (e.g., volunteer work) that will suffer?
- How much stress can I afford to add to my life?
How to finance your post-retirement business
Even if you merely need to print flyers for your next quilt exhibition, you’ll probably need to invest some upfront cash, regardless of whether you want to utilize savings or apply for a small business loan. Here are some things to think about if you need finance for your new retiree business endeavor.
Bootstrapping
If your passion is advanced, you probably already own a lot of tools and information. Your new company could be able to be funded through bootstrapping, which is the practice of funding a company entirely on your own dime from operational profits and startup expenditures.
Bootstrapping keeps you debt-free. However, self-funding also means you may lack the necessary upfront revenue for hiring or advertising – two essential components to business expansion.
Still, bootstrapping is good for retirees because it helps minimize risk. Older entrepreneurs don’t have decades to correct their finances from a business that’s gone bust. Start small and test the market to see if your business is viable before taking on debt or dipping into your nest egg.
Personal loans
If getting your new business off the ground means a small purchase – materials, equipment, ads – you may want to take out a personal loan. Borrowers with a good or excellent credit score (690 or higher) enjoy the widest repayment options and lowest interest rates. Generally, personal loans have lower APRs than credit cards, especially for high-credit-score borrowers.
Government funding
Seniors can start or grow new enterprises with the assistance of federal loans guaranteed by the U.S. Small Business Administration. Seniors can obtain funding from commercial lending institutions more easily since the SBA insures loans for lenders (much as the Federal Deposit Insurance Corporation). Facilitating connections between small companies and cooperating lenders is the SBA’s online referral service.
Venture capital
The SBA can also assist you in finding a venture capitalist if you’d want to stay away from lending institutions. Senior entrepreneurs and small business investment companies (SBICs), which are privately held businesses subject to SBA regulation and licensing, might be connected by the agency. SBICs buy stock in businesses or provide loans to them.
Crowdfunding
Seeking financial backing from the general public might occasionally be the most effective strategy for launching a new company.You can accomplish exactly that using crowdfunding websites like Indiegogo, GoFundMe, and Kickstarter. You may raise money from internet contributors by starting an online fundraising campaign to launch your business. Rather than giving them money back, you give them presents, such as an early copy of your product or a signed copy.
Retirement accounts
Drawing money from your retirement account is a feasible funding option that gives you more investing control than going via a loan institution, albeit it should really only be done as a last resort. The government lets you borrow against, invest in, or take money out of your retirement account if you have a 401(k) plan, but there are a lot of requirements. Seek advice from a retirement account specialist prior to taking any cash out.
You may roll over your retirement funds into a new 401(k) and use Rollovers as Business Startups (ROBS) to invest in your own business. It’s a difficult procedure that jeopardizes your retirement funds even while you avoid fines and debt.
How will your side business affect your taxes?
Your small business will definitely impact your taxes. Hopefully, you’ll see a profit to report on your yearly income taxes. That’s a good problem to have.
However, your tax preparation will become more complicated; you must save receipts to deduct business expenses and record overhead costs. Here are some ways starting a business will affect your taxes:
Social Security benefits
If your new business becomes profitable after you start receiving Social Security benefits, you could have to begin declaring a portion of your benefits as taxable income, particularly if you were previously solely dependent on Social Security. The precise amount will vary depending on your combined income, but the usual is 85 percent. To find out how much of your Social Security benefits could be taxed, utilize the Notice 703 IRS form.
Business expense deductions
Like any other for-profit business owner, you can reduce your tax burden by claiming business expenses on your tax returns. The IRS requires a business expense to be “ordinary and necessary” to the operation of your business.
Two of the most common sources of expenses for small business owners are the use of your home and vehicle for business activities. You can deduct a part of your expenditures for each of them, including the cost of a home office and average mileage rates for travel. Even some of your first startup costs may be written off.
Business expense deductions definitely complicate your yearly tax filing, but millions of seniors manage it. You’ll need to keep receipts for your expenses and track your car mileage, but the tax savings are worth the time.
Your tax rate
Your taxable income and tax rate will rise as a result of your new business profits. This can place you in a different tax bracket based on your income level. Determine your retirement tax rate to see how much your company earnings will change your taxable income since it might affect the proportion of your Social Security that is taxed based on your additional income. Calculate your retiree standard deduction first to fine-tune your estimated tax rate.
Self-employment taxes
Your employer withheld your federal, state, and other payroll taxes in addition to FICA when you worked for them. You now have an obligation as a self-employed business owner to monitor and record incoming payments. Individual business owners often have to pay income tax as well as self-employment tax, which includes Social Security and Medicare taxes. If your net self-employment income is $400 or more, you have to submit an income tax return.
Quarterly reporting
Business owners are required to submit quarterly self-employment payments to the IRS if they anticipate owing more than $1,000 in taxes for the current tax year after deducting their refundable credits and withholding. Your quarterly self-employment taxes are estimated and filed on Form 1040-ES, not Form 1040. The IRS website is where you may make your quarterly self-employment tax payments.
Because of limited savings, small businesses can find it difficult to pay their quarterly taxes. Ensure you accurately estimate and withhold them throughout the year so you’re not surprised with a big tax bill.
Resources for starting a small business
Here are some additional resources to help you learn how to make money in retirement:
Entrepreneur training
- Small Business Administration: To assist you in launching and managing your small business, the SBA provides free online courses.
- The Chamber of Commerce Foundation Blog has a variety of articles about starting a business.
- Khan Academy: View many interviews with well-known business owners discussing their approaches.
- Kutztown Small company Development Center: The university’s SBDC provides free online courses on a range of subjects, such as marketing and company development.
Networking
Professional advice on starting your small business helps you avoid common mistakes early on. Here are some resources to connect you with the right people.
- Seniors can find knowledgeable business mentors through SCORE, a nonprofit entrepreneur network.
- Small Business Development Centers (SBDCs): SBDCs provide free, extensive, one-on-one professional business advice.
- Meetup groups: They’re a terrific way to connect with other freelancers, small company owners, or others who have similar interests.
Other resources
- Veteran Entrepreneur Resource Guide: This guide provides small company resources to entrepreneurs who have served in the armed forces.
- “Developing a Business Plan”: Learn how to write a successful business plan with this free online resource.
Skye Schooley contributed to this article. Source interviews were conducted for a previous version of this article.