By Tom Polanski
With retirement looming on the horizon, many boomers often consider starting a home-based business around a special hobby or skill they have. If this sounds like you, there are a few important considerations to keep in mind before you “make the plunge” into entrepreneurship.
Health Insurance and Retirement Plans for the Self Employed
First, know that when you leave your current job, you’ll also likely be leaving behind a well-established 401(k) or other retirement plan and health insurance benefits. Being the owner of a business means you’re in charge of your own healthcare and retirement planning.
It also means you’re responsible for your own health insurance too (though you can deduct the insurance premiums you pay off of your business taxes). Trying to get health insurance coverage at your current age can be difficult compared to someone in their 20′s or 30′s.
You’re also responsible for setting up your own retirement plan. Since the government doesn’t skim off portions for social security, Medicare and other programs from your paycheck, you’re left to do it yourself through estimated tax payments which are generally made each quarter. Your local Small Business Administration can help answer any questions and help you get started.
Do You Have Enough?
Before you start your own business, be sure you have enough financing to cover it. Many baby boomers have a passion for their chosen hobby or skills – and believe that passion alone will drive their sales. While it does play a good part in how well you do financially, be sure you have enough to cover your losses – especially in the first couple months of operation.
Make a Business Plan
At some point in your business, you may need to take out a loan to pay for equipment or other necessities. Banks often want to see your business plan to make sure you have a way to repay that loan. In addition, having a business plan will help you set your sights on goals you want to accomplish within a specific timeframe and will help keep you focused. The Small Business Administration can also give you tips on creating a business plan, or consult your local library for many business plan creation books.
What Business Will You Choose?
There are lots of different business models to choose from – as well as legal business structures such as a corporation, sole-proprietorship or limited-liability company. Which one you choose depends on many factors, such as whether or not you’ll have employees or if you’ll work together with your spouse or a relative. Making an appointment with an accountant can help you understand the tax benefits and pitfalls of each type of business before you make a decision.
Ready to Get Started?
Baby boomers have an amazing vitality that stems from all the life experiences they’ve been a part of – from civil rights movements to moon landings and everything in between. Running a business can be an exciting and fruitful experience – and your generation has the resolve to sail through the best times, and to cut back on the hard times.
Good luck!