Halvorsen, who specializes in self-employment and entrepreneurship among older adults, told me that at the Gerontological Society of America conference in Boston last month. Since entrepreneurship for people 50+ is something I write about frequently, I wanted to learn more. So I followed up with a phone call for a deeper dive and to hear Halvorsen\u2019s advice for people considering starting a business for retirement income.<\/p>\n\n\n\n
\u201cFor those who choose to jump into the game when they\u2019re 50 years old or older without a financial safety net to fall back on, this is a problem,\u201d said Cal J. Halvorsen, an assistant professor at the Boston College School of Social Work and an inaugural member of the Encore Public Voices Fellowship<\/a>.<\/p>\n\n\n\n \u201cI am not here to argue that entrepreneurship is inherently bad. New businesses do contribute to economic growth, and in turn, job creation,\u201d he told me. \u201cBut what we see is about half of new small businesses end up closing within five years. If you\u2019re retired, or close to that stage, there is less time to make up for losses.\u201d<\/p>\n\n\n\n Read on <\/strong>Forbes<\/strong><\/a><\/p>\n\n\n\n Essentially, there are two basic motivations for turning to entrepreneurship at older ages, according to Halvorsen.<\/p>\n\n\n\n \u201cScholars call it \u2018the push and the pull,\u2019\u201d he said.<\/p>\n\n\n\n \u201cThere are those who are pulled into entrepreneurship because it is something they\u2019ve wanted to do their entire life. This is finally the chance you can do it.\u201d Others, Halvorsen added, are people who are \u201cpushed into it because they might be out of a job. And we know that over 50, it\u2019s much harder to get reemployed. They might have to start something on their own as a way to keep earning an income.\u201d<\/p>\n\n\n\n Halvorsen is not a fan of the \u201cfollow your passion\u201d advice frequently given to men and women considering launching businesses in midlife or later.<\/p>\n\n\n\n People are \u201ctoo often encouraged to start new business and pursue their passion,\u201d he said, adding that doing so can \u201cbe fraught with peril.\u201d<\/p>\n\n\n\n One of his worries: that moving into entrepreneurship might keep some people from being ready for the financial realities of retirement, including health care costs and coverage before hitting 65 and qualifying for Medicare.<\/p>\n\n\n\n His advice: \u201cYou have to figure out how you are going to pay for health care coverage which can be expensive \u2014 and it\u2019s a time when you may be experiencing more health care needs.\u201d<\/p>\n\n\n\n Halvorsen\u2019s biggest worry, though, is where the older entrepreneurs will find the capital to start their dream businesses.<\/p>\n\n\n\n \u201cIn light of the fact that so few people have enough saved for retirement, I\u2019m fearful that people will tap into what little they might have in retirement savings,\u201d he said. \u201cSome of them are going to be wildly successful, but my fear is many of them won\u2019t, which can lead to higher rates of poverty for them down the road.\u201d<\/p>\n\n\n\n I agree wholeheartedly. I always caution prospective entrepreneurs over 50 to avoid tapping retirement accounts to fund their start-up. It can be pretty risky for their future financial security.<\/p>\n\n\n\n Halvorsen doesn\u2019t want people to think he\u2019s all gloom and doom about second act entrepreneurship, though. \u201cIt can be so exciting,\u201d he noted.<\/p>\n\n\n\n Older entrepreneurs, Halvorsen said, \u201cgain a whole lot of flexibility in their work, and that\u2019s a major motivating driver for a lot of people. That does become more important the older you are. And they gain autonomy; they get to become their own boss.\u201d<\/p>\n\n\n\n The people who are best prepared to become entrepreneurs, Halvorsen said, are those who have \u201chigher levels of human capital, social capital and financial capital.\u201d<\/p>\n\n\n\n I asked him to explain. \u201cHuman capital might be, for example, education and work experience. Social capital would be their social network. Financial capital would be their financial assets and wealth. If you have higher levels of these, it has been shown that you can be more successful in entrepreneurship.\u201d<\/p>\n\n\n\n Fortunately, these forms of capital tend to increase with age, because you have had more time to cultivate them. As a result, older people in general would likely be more successful at entrepreneurship than younger ones, Halvorsen said.<\/p>\n\n\n\n In fact, most successful entrepreneurs are middle age and beyond, as I wrote in this Next Avenue post<\/a>.<\/p>\n\n\n\n \u201cSuccessful entrepreneurs are middle-aged, not young,\u201d according to Age and High-Growth Entrepreneurship<\/em>, a paper by Pierre Azoulay and J. Daniel Kim of the Massachusetts Institute of Technology Sloan School of Management, Benjamin Jones of Northwestern University\u2019s Kellogg School of Management and Javier Miranda of the Census Bureau\u2019s Center for Administrative Records Research.<\/p>\n\n\n\n The study\u2019s researchers calculated a mean age of 45 among the 1,700 founders of the fastest-growing new ventures. And they found the \u201cbatting average\u201d for creating successful firms rises dramatically with age.<\/p>\n\n\n\n \u201cA 50-year-old founder is 1.8 times more likely to achieve upper-tail growth than a 30-year-old founder,\u201d they wrote.<\/p>\n\n\n\n Research from The Kauffman Foundation, a nonpartisan group supporting entrepreneurship, backs this analysis. In its 2018 State of Entrepreneurship<\/a> survey of 2,165 business owners, older entrepreneurs reported having less difficulty starting their companies than younger ones, in a variety of ways.<\/p>\n\n\n\n The authors of Age and High-Growth Entrepreneurship<\/em> theorize that there are few reasons an older entrepreneur may reap the benefits of start-up success over a younger one. These include: greater experience in management, marketing and finance, as well as a richer, deeper knowledge of an industry.<\/p>\n\n\n\n Even though my conversation with Halvorsen was triggered by his \u201clet\u2019s be honest about the stark reality of starting a business later in life\u201d view, it wrapped up on a more positive note, especially for people in their late 60s and beyond.<\/p>\n\n\n\n \u201cSome of the inherent risks of self-employment and entrepreneurship decline when people begin to take Social Security retirement benefits and become Medicare eligible,\u201d Halvorsen said. \u201cSo, people who create new businesses with monthly Social Security checks as a base of support will continue to receive Social Security whether or not their businesses succeed; that monthly income would help them to weather the ups and downs. Further, for those who become entrepreneurs at 65 and after joining Medicare, the concerns about health care costs will be greatly reduced.\u201d<\/p>\n\n\n\n Even so, Halvorsen \u2014 still careful to keep the yellow light flashing \u2014 advised: \u201cOne should still be cautious about investing their own retirement savings into a business unless they have enough of a financial cushion should that business fail.\u201d<\/p>\n\n\n\n \u00a0By\u00a0Kerry Hannon,<\/strong><\/a>Entrepreneurship and Personal Finance Expert<\/p>\n\n\n\n Kerry Hannon has covered personal finance, retirement and careers for The New York Times, Forbes, Money, U.S. News & World Report and USA Today, among other publications. She is the author of a dozen books including Money Confidence: Really Smart Financial Moves for Newly Single Women<\/em><\/a>, Great Jobs for Everyone 50+: Finding Work That Keeps You Happy<\/em> and Healthy…and Pays the Bills<\/em><\/a>, Getting the Job You Want After 50<\/a>,Love Your Job: The New Rules for Career Happiness <\/a><\/em>and What’s Next? Finding Your Passion and Your Dream Job in Your Forties, Fifties and Beyond<\/em><\/a>. Her website is kerryhannon.com<\/a>. Follow her on Twitter @kerryhannon<\/a>.<\/p>\n\n\n\nThe Risk of Starting a Business in Retirement<\/h3>\n\n\n\n
![\"Cal](\"https:\/\/i0.wp.com\/www.nextavenue.org\/wp-content\/uploads\/2018\/12\/Cal-Halvorsen-300x300.jpeg?resize=300%2C300&ssl=1\")
<\/a>Follow Your Passion? Maybe Not<\/h3>\n\n\n\n
Advice for Prospective Second Act Entrepreneurs<\/h3>\n\n\n\n
The Joys of Being an Older Entrepreneur<\/h3>\n\n\n\n
Most Successful Entrepreneurs: Middle Age and Older<\/h3>\n\n\n\n
Why Older Business Owners Have an Advantage<\/h3>\n\n\n\n
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