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Retire into entrepreneurship

Published: 
Thursday, October 12, 2017

Most people’s concept of retirement is to take it easy and relax the rest of your life. Having come to the end of your work life does not mean it is the end of life. Some see a new phase, a new way to transform yourself as the case below shows. Retiring into entrepreneurship can be an attractive option.

Take Jimmy, for example. He worked at a large engineering company for more than 30 years and is now retired. But he had a plan to do something with those years of experience: maintain and service large engines used by the construction and energy industries. He was an expert on CAT and Cummins engines.

He started—as most entrepreneurs do—in his garage and initially looked for small jobs from clients he had at his former employer. Jimmy had no convincing to do as they all knew about his competence. He used some of his long-term savings and invested in his business. He did not depend on his startup to live as his pension payments took care of his living expenses. He also employed two members of his family, something he could not do at his ex-employer. Jimmy feels more satisfied that he can do as he pleases and now he is making more money.

Demographic problem

The world’s population is ageing as birth rates decline and life expectancy increase.

In T&T, we face the same demographic problem and it has many social and economic impacts. The greater the age of your population, the increased burden on the shrinking pool of working members who now must support the retirees through their taxes. The healthcare costs of supporting the older citizens can also weigh on the state.

Recently, the Minister of Finance raised the issue of increasing the retirement age for NIS pensioners. The NIS pension fund is not large enough to support the large numbers of retirees in the future. What countries are doing about this?

Globally, many countries have raised their retirement ages. The age of retirement in the US was up to 66 from 65 years ten years ago and, by 2025, it will increase to 67 years. The Organisation of Economic Cooperation and Development (OECD) has advised some first world countries to raise their retirement ages since workers can live 20 years beyond their last day on the job.

Retirees problem

Retirement means something different today.

Why sit back in a rocking chair and enjoy a cup of coffee and let the day pass you by? Life offers more options to enjoy the post retirement period.

But for some retirement has some challenges.

Some may not have saved enough to live comfortably. Most Trinidadians seldom think about retirement and the amount of money they must save to possess a large enough fund. This despite the tax break of $50,000 per year for an annuity, many citizens do not know what an annuity is.

Then there is the larger cost of medical expenses.

Most medical insurance plans close or are very expensive to maintain after 60 years. Many of the elderly also face the increased cost of their children’s education and the luxuries they want to enjoy.

Entrepreneurship could be a solution to these demographic and personal issues

Entrepreneurship solution

Entrepreneurship offers a person a chance to have unlimited income, more career freedom, a possibility of reaching your full potential and the ability to change the world. You also can leave a legacy behind.

Entrepreneur magazine makes four recommendations to mature people who are considering entrepreneurship:

1. Know your expertise: leverage your skills as it makes more sense to start there
2. Decide on a business that suits your finances: don’t gamble on risky projects, but be a calculated risk taker
3. Identify your weakness: where you are weak, hire someone who has competence there
4. Enjoy your retirement: remember your business goals and don’t forget yours as a mature person

What does the research say about people who start a new venture in post-retirement?

Maria Minniti, et al, conducted five biennial surveys between 2002 and 2011 for the English Longitudinal Study of Ageing to get insight into the dynamics of aging and the economic and social issues between people ages 50-67 years.

Of the 2,851 individuals in the sample, 115 made the entrepreneurial leap. These people experienced a greater quality of life compared with others in the sample who either stayed in the same job or switching to a new job. They did not measure against no job (retirement) but we know that many older people end up lonely when they lack a plan.

However, what is startling about the research is that people who choose the entrepreneurship option, on average, experienced a significant reduction in income compared to other working groups. This could be explained by the risky nature of starting a business and the benefits of this could only be measured over a long time. One could argue that if the retiree’s goal is to leave a successful venture for the next generation, then this could only be achieved in the post-succession period. This is what we call “patient capital” in the family business discipline.

But we know from other research that persons enter entrepreneurship not only for the money. If money was the only motivator, Bill Gates would have stopped working long ago. Why work for money when your net worth is over US$70 billion? Money motivates but only up to a point. It’s the sense of achievement that keeps entrepreneurs humming and maybe that would explain the higher quality life index. Mature individuals tend to value quality of life greater than money.

Recommendation

If you, as a retiree, are considering starting a new business, consider the advantages you have over youth. Apart from the vast knowledge, you may have no mortgage or have a property which can be used to house a business. You might have family members who can work for free in the early stages and don’t forget the network you possess.

Some trade unions have large numbers of retirees and these can be a source of entrepreneurship development. TTUTA has an estimated 5,000 retirees.

Since entrepreneurship also offers advantages for the national economy, a policy change in mature persons access to their pension funds to start a business would encourage more business startups.

A conservative 10 per cent no penalty withdrawal from individual pension and annuities is reasonable and should not mean pensioners could gamble away their retirement. This change will also make retirement saving more attractive and it would be a good addition to the 2017/18 budget.

A policy change like this could have the impact of generating more startups and the possibility of greater tax revenues, more jobs created and most of all, mature citizens who have greater quality of life.

Entrepreneurship is better than retirement for the economy.

Sajjad Hamid is a SME & family business adviser. He can be contacted via

[email protected] entrepreneurtnt.com