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Many retirees are launching businesses instead of stepping away from work entirely. Effective financial planning can help support their entrepreneurial goals and long-term financial security. Your job is to protect their retirement while helping them build something new.
A Rising Trend Among Older Entrepreneurs
More retirees are building companies instead of winding down work. According to Enterprise Nation's survey, around 35% of small businesses are launched by individuals in their late 40s and older.
This shift reflects a mindset change — many late-career professionals don’t want to slow down. They're looking for autonomy, purpose and the chance to apply their experience on their terms. As this trend continues, financial advisors must evolve their planning approach to support this unique stage and transition.
How to Support Retirees Who Want to Launch a Business
Your guidance is key to retirees' financial stability. Here's how you can help them build a business without risking their retirement.
Assess Their Risk Tolerance and Investment Timeline
Start by measuring how much risk your client can take. Don't rely on age as the only factor — focus on their cash flow needs, expectations for the business and personal obligations.
Ask how much income they need to support themselves, if they can afford to wait for the business to become profitable and what happens if it doesn't generate returns. When you map out these details, you can recommend how much capital to allocate to the business versus how much to reserve for retirement. Keep personal stability at the center of this strategy.
Fund the Business Without Weakening Retirement
Discourage clients from pulling large sums from tax-advantaged retirement accounts. To avoid tax penalties, help them evaluate other sources, such as brokerage accounts or liquid savings. When you separate personal income and business growth funds, you create structure and reduce stress.
Offer a tiered approach that includes using cash or brokerage assets, scheduling withdrawals to provide income with minimal disruption and keeping long-term retirement accounts intact unless all other options fail.
Choose the Right Business Structure
A business impacts personal liability, tax treatment and credit exposure. While financial conditions vary, the business's structure and use of funds may affect your client’s credit.
Sole proprietorships and partnerships often tie business behavior directly to personal credit. In contrast, a limited liability company (LLC) acts as a separate legal entity. An LLC's late payments or defaults typically won't affect a personal credit score unless your client signs a personal guarantee.
Encourage clients to work with legal and tax professionals when selecting a business structure. Choose a format that protects their assets and supports their financial goals.
Build a Reliable Income Plan
Many new ventures take time to generate profit. Without a solid income plan, your client might withdraw too much from investments or depend on unstable cash flow.
Help them create a layered strategy that includes:
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Delaying Social Security when possible to increase long-term benefits.
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Creating short-term income through annuities, dividends or portfolio withdrawals.
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Starting with a modest business salary and reinvesting early profits.
Address Insurance Gaps
When retirees start businesses, their risk exposure changes. They may not realize how many protections they left behind when exiting the workforce.
Help them update their coverage by:
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Adding key-person insurance if the business depends on them directly.
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Setting up general liability coverage, even if they work from home.
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Reviewing disability insurance options to protect income in case of injury or illness.
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Exploring long-term care insurance early to secure more favorable rates.
Prepare for Mixed Tax Situations
Combining retirement withdrawals and business income creates a new tax profile. Your client must stay organized to avoid penalties and fully utilize available deductions. They should keep this plan active throughout the year, not just at tax time.
Advise them to avoid early withdrawals that trigger unnecessary taxes and to consider contributing to SEP IRAs or Solo 401(k)s to continue saving. They can also use business expenses to lower taxable income and time income and distributions to manage tax brackets effectively.
Use AI to Improve Investment and Business Decisions
Encourage your client to use technology that supports better decision-making. AI models help investors and business owners predict risk more accurately. These tools process historical data, social media signals and economic factors to spot trends and identify downturns early.
By using AI-backed platforms, your client can respond to market changes before they cause damage, adjust their investment strategy more precisely and understand business performance in greater detail.
Where Security Meets Ambition
Help your clients build a financial foundation that doesn't force them to choose between stability and growth. Retirement and entrepreneurship can coexist when you support them with clear planning, risk awareness and solid income strategies. Focus on structure, timing and protection. That's where your expertise delivers real value.