Should Entrepreneurs and Small Business Owners Retire Late? Or Even Skip Retiring?

Recently I found myself talking with friends about a crazy idea. The idea that entrepreneurs should retire late. Or maybe even just not retire.

So this blog post discusses this notion.

But first a quick caveat. The idea to “retire late” or “not retire at all” might reasonably be someone’s “Retirement Plan A”.

However everybody who plans to not retire or who plans to retire very late needs to plan for the possibility that they stop working earlier than they plan.

That caution made, however, at least five compelling reasons exist to retire late.

Reason #1 to Retire Late: People

A first compelling reason: The people you work with. For example, you may be working with great people you connect and collaborate with only because you work.

The obvious example of this situation for many small business owners? When they get to work with family members. Or long-time friends.

But if you have customers or clients or vendors you’ve worked with for decades? Those relationships may run pretty deep, too. May be pretty intimate. That’s a reason to keep working and stay connnected.

And then another angle to consider here: For many of us, work represents the most diverse social environment we enjoy. Work may be the place where folks from different cultures, backgrounds, ages or viewpoints gather. So another reason to retire late or work longer.

Reason #2 to Retire Late: You May Be Really Good

A second reason to keep working: You may be rather good at what you do. Or even really good at what you do.

So good, in fact, that you enjoy a flow experience through work. At least most days.

Which is something to consider. Because you may lose that if you retire.

An example of this: The Economics department of Harvard University where you’ve got tenured faculty in their sixties and seventies still doing research that matters. (I talked in last month’s blog post about the long-run trend in long-term interest rates study that some of those guys did, including Ken Rogoff who is in his late sixties as I write this.)

Reason #3 to Retire Late:  Compelling or Interesting Work

Another reason to keep working: Work may provide you with unparalleled opportunities for intellectual stimulation. And creative outlet.

Which makes sense, right? As compared to what you or I might cook up on our own in the garage? Or the backyard?

The structure of a job or workplace helps. The chance to collaborate with other creative, skilled and fun people helps. Access to far deeper resources helps.

I’m not really a student of Buffett-ology. But it seems pretty safe to say Warren Buffett (age 92) continued working long after he became a billionaire because he enjoyed the work.

And watching a recent concert by the rock band Journey? Band leader Neal Schon (age 68) still obviously deeply enjoys that experience.

Reason #4 to Retire Late: The Money

In many roles, and maybe especially for entrepreneurs and small business owners, your last years of work may be your highest income years.

You may for example be leveraging decades of experience. Enjoying the fruits of your sweat equity and labor.

A small business you own or mostly own may generate a higher return on investment than you would earn in a traditional asset class like a stock index fund.

A $1,000,000 of equity in a small business, for example, might generate on average $400,000 of income. If an entrepreneur liquidates that business, pays capital gains taxes on the gain, and then reinvests the $800,000 left over after taxes? The $400,000 of business income might drop to $30,000 or $40,000 of investment income.

No, money isn’t everything. And the love of money is the root of all sorts of evil as the Apostle Paul reminds us. But the money can matter. Sometimes a lot.

Retiring late should innoculate you from something called “sequence of returns risk,” which is just a fancy way to say the risk you encounter a bad patch at the start of your retirement.

And retiring late should nicely boost the amount you can draw from your retirement accounts.

 Reason #5 to Retire Late: Unusual Autonomy

A final factor to consider for entrepreneurs and small business owners? The control and autonomy the business owner enjoys.

That autonomy on its own probably bumps up the enjoyment of working. (See this study for example: Time Use Study of Millionaires. )

And then even beyond that, an entrepreneur or business owner may be able to structure a continuing role that works well not just for the business but also for the entrepreneur. And for her or his family.

I feel like I see many examples of this among our clients who choose to continue working.

Enough said. But one last comment. It’s been the holiday season for many. So belated holiday greeting to you and for your family. And best wishes for the coming year!