Have you ever worried if you’ll run out of money? Can you imagine a point where you might wonder how you might bring in that next dollar? Are you thinking you might have to cut expenses in order to stay afloat?
Who do these anxieties describe? An entrepreneur? A retiree?
Trick question! It’s both!
More and more financial experts now recognize the similarity between living a comfortable retirement and running a sustainable business. And if you’re thinking of retirement, you just might want to pay attention to what they say.
“Starting a business and saving for retirement are both about the same thing,” says Betty Mooney, President & Finance Officer at Brick Restoration, Inc., in Houston. “And the way to get there is not as different as you may think.”
If you doubt the similarity, consider this. Just as startup business owners find specialists to help guide their journey, so, too, can retirees move forward without the fear they are alone, should they prefer that route.
“For so long, they have depended on others to manage their business,” says Tiffany Welka, Financial Advisor and Accredited Wealth Management Advisor at VFG Associates in Livonia, Michigan. “Now is the time that they need to take control and work with a professional to provide them the income that they need to live the lifestyle that they have worked so hard for!”
Still, a better idea is to grasp the classic rugged individualism of “go-it-alone” entrepreneurs. Why put yourself in the position of depending on the kindness of strangers when you can control your own destiny.
Owning a business is empowering. It breeds a confidence that can overcome the fears of an uncertain future. Letting retirees know that their retirement is their new startup business can give them a similar boost of self-assurance.
This is most important when you consider the unknowns many face heading into retirement. These unknowns entail risk. “For future retirees, the analogy of starting a business could be helpful because of the risk involved in both situations,” says Ryan R. Miller of Elser Financial Planning in Indianapolis. “Just like new entrepreneurs can be nervous to subject themselves to big financial risks, retirees can be nervous to turn off the regular paycheck and rely on accumulated savings from their working years.”
Scott Bishop, Partner & Executive Vice President of Financial Planning at STA Wealth Management in Houston, believes you should start with “the end in mind” whether you’re working on a business plan or a retirement plan.
When you’re starting a business, Bishop says you should ask yourself if “you are eyeing increasing your income (soon or down the road), growing to sell for large capital appreciation (if so, can you still maintain your standard of living while growing the business) or some combination. If you start with the end in mind, you have a cash flow and cash needs budget for the business and also have a timeline for when you will want to reach these goals.”
Planning for retirement requires a similar thought process. Bishop says, “When you have a retirement plan, you need to know what resources you’ll need, when you’ll need them and what other issues you’ll need to address in retirement (health, longevity, taxes, other goals). Just as when you have a business, where you should have a growth and exit strategy planned, if you are in retirement, there are great parallels.”
Both starting a business and starting retirement can scare you. Both are a big deal, and a big project. Big projects can intimidate you. Overcoming this fear, however, requires the same strategy. It’s one you may have heard of, even if you never owned a business. Any time you take on a large project, the most effective strategy is to think of it one step at a time.
“Don’t let the great, big end-goal be the enemy of small moves you can make today,” says Amy Ouellette, director of retirement services at Betterment for Business in New York City. “Just like starting a business doesn’t require that you perfect your marketing, accounting, or product management skills overnight, you don’t have to become an investing guru or financial planner to get started saving for retirement. Start with small habits and with what you know – whether it’s enrolling in your 401(k) plan, starting an IRA, or even a savings account — and keep an eye on the end game as you grow your confidence. Over time you’ll be able to take bigger steps forward and learn from mistakes to build your plan and make it happen.”
Indeed, the best part about treating retirement like a startup business is that it doesn’t require you have any actual experience with starting a business. “Many people dream of starting a business, but rarely do they try,” says Paul Cronin, Principal of The Platinum Years in Boston. “Nonetheless, they can imagine thinking deeply about it, and may be willing to do research. As such, the idea of thinking about retirement like starting a business has some inherent logic.”
So, go ahead. Think of a retirement plan as a business plan. And don’t worry. You won’t have to fill out the marketing strategy part of that template. It’s really the budgeting and risk assessment parts that you’ll need for retirement.
You may discover treating your retirement like a startup business might just become a very easy way to increase the odds you’ll retire in comfort.
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