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If you can't find a job, consider creating your own. People ages 55 to 64 accounted for about one-quarter of new entrepreneurs in 2010, according to the Kauffman Index of Entrepreneurial Activity. It's a trend on the upswing. In 1996 -- the first year the Kaufman Foundation did this survey -- the over-55 crowd represented 14.5 percent of entrepreneurial activity.
More than half of the over-55 entrepreneurs started service businesses last year.
What are the advantages to running your own business? For one thing, the ability to take advantage of retirement planning tools like an individual 401(k), which allows businesses run by individuals, and individuals and their spouses, to save far more than they probably could working for somebody else.
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.
How much you can save is dependent on how much you make, but even if your business income is modest, the benefits of saving within a single 401(k) are attractive. For instance, let's say you are 55 and you earn $25,000 in 2011 selling used golf balls. Here's how the numbers work:
- Maximum single 401(k) contribution: $16,500.
- Maximum 401(k) catchup contribution, $5,500.
- Maximum profit-sharing contribution: $4,646.76.
- Total maximum single 401(k) contribution in 2011 on $25,000 in earnings: $23,233.81.
As you can see, if you can live on something else and bank what you make off a small business, this can be a very attractive way to build retirement savings quickly.
