Starting a business in your 50s? 3 money questions to ask first



Myles Ma

Myles Ma

Senior Managing Editor

Myles Ma is a health care expert & personal finance writer for Policygenius. He edits the Easy Money newsletter.

Published September 26, 2019|3 min read

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Startups aren't a young person's game anymore. More than ever, older people are becoming entrepreneurs.

Adults between the ages of 55 and 64 made up 25.8% of new entrepreneurs in 2018, according to a report from the Kauffman Foundation. That represents a significant increase over 1996, when they made up 14.8% of new entrepreneurs.

Older people, who have had more time to accumulate assets, may have a greater ability to fund new businesses than younger founders, said David Frisch, a certified financial planner and president of Frisch Financial Group.

"Rather than retiring, they want to pursue something new and they want to be their own boss," Frisch said.

People are also staying healthier longer, making it easier to pursue a second career, Frisch said. Technology has also lowered the barriers to entry for new businesses.

Want to start your own business? Here's three money questions older people should ask themselves before they decide to become entrepreneurs.

Where will you get funding?

A good business plan should include how you'll fund the business, especially if you quit your job and give up a steady salary. Unlike younger founders, older people may have their own financial resources to lean on. Depending on how much capital the business requires, other sources of funding may include loans backed by the Small Business Administration, investment from friends or family or money borrowed against 401(k) balances or home equity.

Founders also need to consider how much time they're willing to invest. Older founders may have other responsibilities competing for their hours. Frisch started his business at 30, before he was married with children.

"Today, being married and having three 17-year-old triplets getting ready for college, life is a little different in terms of being able to start something new," Frisch said.

What happens if I fail?

About half of small businesses fail after five years, according to the U.S. Small Business Administration. Even if they have all the belief in the world in their business, new owners should at least prepare for the worst.

For older people, it's important to calculate how giving up a steady salary and investing capital into a new venture will affect their retirement. Starting a new business can often require borrowing money, at a time when most 50-year-olds should be reducing their debt as much as possible.

What about insurance & other benefits?

One big perk of working for someone else: They deal with the health insurance. Unless you have a spouse whose insurance can cover you, expect to pay more for premiums.

Founders in their 20s may not worry so much about having solid health and dental coverage, but for older people, health expenses tend to be higher.

If you aren't covered by someone in your family, you can (and should) still get health insurance. Depending on where you live, you may qualify for Medicaid, the government-run program for people with limited incomes. Read our state-by-state guide to see if you qualify.

If you're over 65, you qualify for Medicare, a government-run program with no monthly premiums. Learn more here.

You might also be able to extend your old employer's health coverage through COBRA. In addition, quitting your job qualifies you for a special enrollment period on the federal and state health insurance marketplaces. These plans might look expensive on paper, but many people qualify for subsidies to help pay for premiums and other expenses.

If you're striking out on your own, read our guide to building your own benefits package.

Image: Hulton Archive