With 20 to 30 years of retirement ahead of them, the modern boomer wants to do more than sit on the front porch and watch the days go by. Today’s retirees are living longer1, and most want to enjoy an active lifestyle2. For many, this includes continuing to work. In fact, only 27 per cent of those surveyed for the Sun Life Canadian Unretirement™ Index expected to be retired at age 65, while another 26 per cent expected to be working full time at 66.
But working past retirement doesn’t necessarily mean working as an employee—self-employment is a growing option for many boomers. According to 2006 Statistics Canada census data, for those still in the workforce at age 65 or older, about 44 per cent of men and 28 per cent of women were self-employed3.
Self-employment offers many benefits to boomers, including flexible hours, part-time opportunities and the satisfaction that comes with being the boss. It allows them to work around other obligations, such as caring for family members, including grandchildren. And self-employment can help boomers accommodate any health or mobility issues.
Boomers are seasoned employees with decades of valuable experience and skills, and starting a business in a field related to their previous career is common. Plus, they can take advantage of their existing network of connections to enhance freelance work, such as consulting, and help launch a new business. In fact, Statistics Canada 2006 census data also shows that 22 per cent of self-employed men aged 65 and older provide business services, as do 17.3 per cent of self-employed women in the same age range4.
Fewer financial obligations
Boomers may have fewer financial obligations than younger business owners. This can make it easier for them to pursue an entrepreneurial dream that wasn’t possible before retirement.
As workers age, there can be fewer employment opportunities, forcing some into self-employment if they still need to earn an income. The good news? This group can work as much or as little as they want.
And who are these post-retirement entrepreneurs? According to the Statistics Canada 2011 report on Senior’s Self-Employment by Sharanjit Uppal, self-employment is more popular with individuals who have higher education5 and are financially stable6.
Post-secondary studies may have given these individuals the skills needed to start and maintain a successful business and post-secondary education can also result in a higher pre-retirement salary—making it easier to address the risks of operating a business because the boomer is more likely to be financially sound7.
If you have self-employed clients
Self-employment brings a unique set of financial challenges to your clients and offers you the opportunity to provide specialized advice. For example, it may make sense for some self-employed clients to establish an Individual Pension Plan (IPP) and others might want to make withdrawals from their Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) investments to smooth out their taxable income. For clients younger than 72, the RRIF can be switched back to an RRSP if their business is doing well and the money isn’t needed. In some cases, income from a business might make it possible for clients to defer drawing from Canada Pension Plan (CPP), allowing them to maximize the amount they receive in the future.
Retirement no longer means the complete end to paid work. Whether they need to earn extra income or just enjoy working, self-employment is a viable option for a growing number of boomers who still have valuable skills to offer the marketplace.
But no matter what the reasons are for starting a business, clients must understand the tax implications that come with self-employment—always advise your clients to get professional tax advice.
- Statistics Canada CANSIM, Table 102-0122 and Catalogue no. 82-211 X
- The 2013 Picture Perfect Retirement Contest, Summary Prepared on 05/27/13
- Uppal, Sharanjit. 2011. “Seniors’ self-employment.” Perspectives on Labour and Income. Spring 2011, vol. 23, no. 1. Statistics Canada Catalogue no. 75-001-XIE. p. 3.
- Uppal, Sharanjit. 2011. “Seniors’ self-employment.” Perspectives on Labour and Income. Spring 2011, vol. 23, no. 1. Statistics Canada Catalogue no. 75-001-XIE. p. 9.
- Fuchs, Victor R. 1982. “Self-employment and labor force participation of older males.” The Journal of Human Resources. Vol. 17, no. 3. Summer. p. 352.
- Georgellis, Yannis, John G. Sessions and Nikolaos Tsitsianis. 2005. “Self-employment longitudinal dynamics: A review of the literature.” Economic Issues ,Vol. 10, no. 2. 39 p.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=921029 (accessed September 26, 2013).
- Fuchs, Victor R. 1982. “Self-employment and labor force participation of older males.” The Journal of Human Resources. Vol. 17, no. 3. Summer. p. 356.