Earlier this year, FasterCapital explored the rise in seniorpreneurs—those age 65 and older who are business owners. The often-cited example of a successful seniorpreneur is Colonel Sanders, who started KFC at age 71, but this is just one example of success found at an age when most people retire. Today, an estimated 8 million boomers (those born between 1946 and 1964) are business owners in the U.S. This group of business people—of which I’m one—has unique challenges and opportunities. If you’re a millennial or in an alphabet generation, it may be helpful to note what’s to come. If you’re a boomer, here are some things to keep in mind.
1. You’re never too old to use what you know
Boomers have a lifetime of experience and knowledge. For some, starting a business is the culmination of years of work in a particular field. For others, it’s a dream—to provide a product or service valuable to the community. Still others do so because they can no longer find employment and want or need to continue working. All of these reasons combine so that about 6% of all startups are those 65 and older. There were 5.5 million startups in the U.S. in 2023, which means that about 330,000 businesses were started by seniors.
2. Working past normal retirement age affects retirement income
Just because the calendar says it’s time to retire doesn’t mean you have to do it. But continuing to earn income affects a number of things:
- Retirement savings. Continuing to work means the opportunity to continue saving money through qualified retirement plans or in taxable accounts. There is no age limit for someone with earned income to add funds to a qualified retirement plan, even though there is an age at which distributions must begin (explained later).
- Social Security benefits. Continuing to earn income affects Social Security benefits and Social Security taxes:
- Increased benefits. Because the formula for Social Security benefits is based on the highest years of earnings up to 35 years, continuing to work—with higher earnings and in earlier years—can increase benefits going forward.
- Credit for delayed benefits. While benefits can commence at age 62, albeit reduced, and full benefits begin with the full retirement age, increased benefits result by delaying the receipt of benefits past the full retirement age. There’s a credit for each month of delay until age 70; that’s the maximum credit.
- Continued payment of Social Security and Medicare taxes. Whether you are an employee of your corporation or a self-employed person, as long as you have earned income you must continue to pay Social Security and Medicare taxes through FICA (for an owner-employee) or self-employment tax (for a self-employed individual).
3. Retirement savings have to be distributed
Working past the normal retirement age allows you to continue contributing to a qualified retirement plan and/or IRA—traditional or Roth (assuming eligibility), as explained earlier. But once you reach the starting age for requirement minimum distributions (RMDs), you have to start taking money out of your accounts. The starting age is now 73 for those born after 1951 and before 1960 (it will be 75 for those born in 1960 and later). RMDs are complicated, so get good tax advice to ensure you’re taking sufficient distributions to avoid penalties. Note: While rank-and-file individuals can delay distributions from their company plan until retirement, this option doesn’t apply to a more-than-5% owner.
Once you reach age 70½, you can direct that funds in your IRA up to a set limit ($105,000 in 2024) be transferred to a public charity. The funds applied in this manner count toward your RMD. This transfer is called a qualified charitable distribution.
4. Health coverage gets complicated
Almost all seniors in the U.S. qualify for Medicare once they reach age 65. This is so regardless of work status. But if their business has a group health plan, understand how coverage between Medicare and the group health plan dovetails. The coordination of benefits—which plan pays first—depends on the number of employees in the company.
- Medicare Primary Payer: fewer than 20 employees
- Medicare Secondary Payer: 20 or more employees
Different rules come into play when COBRA is part of the picture. CMS.gov lays out the various scenarios to determine whether Medicare is the primary or secondary payer.
5. Things change
If you work long enough, you witness a lot of change. Certainly, new technology has dramatically impacted business operations, and everyone in the workplace has had to adapt. Seniorpreneurs probably remember when the Selectric typewriter was a miracle development. Since then, through computers, internet, smartphones, social media, and now AI, technology and business practices continue to evolve, and I submit that seniorpreneurs are used to adapting as well.
One of the sad things I’ve experienced as I continue to run my business is that many of the people I worked with are no longer in the picture. Some have died, but many have just retired. The pleasure from connecting with long-time associates is gone. Sure, there are new people to work with, and they can be wonderful associates. But those who were my connections for 10 years, 20 years, 30 years, or more may be missing from the workday.
Final thoughts
“Age is just a number…”—credited to a number of people, including Joan Collins, Cicely Tyson, and Cecelia Ahern
Are seniorpreneurs dinosaurs in the business landscape? Do they continue to offer goods and services that are wanted? Can they compete with young generation business owners? You tell me.
Another blog on this topic can be found here.
