Older people should not fear their younger competition when it comes to entrepreneurship according to research performed by the Kauffman Foundation, which discovered that the average founder of a successful company launched the venture at the ripe age of 40.
Although we generally imagine startups to be run by young, recent college graduates with a plan, in truth many studies link successful entrepreneurship with more advanced age. This is probably because older workers have garnered confidence from prior experience, industry expertise, a career track record and established assets. The study also found that startups developed by people over the age of 55 are almost twice as likely to succeed than by those aged 20 to 34.
Additionally, the Kauffman Index of Entrepreneurial Activity found that people aged 55 to 64 accounted for about 25 percent of new entrepreneurs in 2010 compared to 14.5 percent in 1996, the first year the Kaufman Foundation performed this survey.
Favorable retirement options
This is an established and rising trend and will probably persist because opening a startup offers favorable retirement planning tools like enabling one to have an individual 401(k), which allows businesses run by individuals, as well as by married couples, to generally save far more than they could working for somebody else. With 55-year olds nearing the end of their career and planning for peaceful retirement, saving is exactly what they want to do after launching a successful startup.
How far can this take you?
In 2011 an individual 401(k) retirement plan permits tax-deferred savings of up to $49,000. If you are age 50 or older, you can save a tax-deferred $54,500 because of the catchup contribution.
Although your savings will obviously reflect your earnings, the benefits of saving up via a single 401(k) are attractive even if your business’s income is moderate. A 55-year old who opened a business and earned $25,000 before taxes in 2011 can contribute up to $23,233 of his earnings into a single 401(k) plan.
If this money is tax-deferred and going straight into a 401(k) and you can afford to live on other money for that year (for example, your spouse’s income), then you are banking all that cash into retirement savings, which is much more than you would contribute if you worked for someone else. If your savings surpass your expenses, you are well on your way to a nice retirement nest egg.