Almost half (39%) of aging Canadians envision becoming entrepreneurs during their retirement years, says a new study by BMO Financial Group.
More generally, 81% plan on working in some capacity during their retirement.
The top reasons for starting a post-retirement business were:
- The need for additional income (75%)
- A desire to stay sharp/mentally focused (62%)
- To leverage an enjoyable hobby (53%)
“Canadians are looking to generate additional income during their retirement years,” says Marlena Pospiech, senior manager of BMO Wealth Planning Group at BMO Financial Group. “People are living longer, so for an increasing number of Canadians retirement savings may need to last more than 25 years.”
Read: Baby Boomers don’t want modest retirements
She adds, “With the decline in employer-sponsored defined registered pension plans and reforms to government pension plans, there’s now a greater need for people to supplement their income. This is particularly true for those who haven’t been saving aggressively through vehicles like RRSPs and TFSAs.”
Read: Define TFSA, RRSP benefits for clients
The survey finds men are more likely than women to start their own businesses, with 46% saying they have plans to do so versus only 33% of females. Of the 46%, those in Alberta are the most likely to start their own companies.
Pospiech says Canadians are getting creative in how they picture their retirements; many view a gradual transition from work to full-time retirement as the optimal choice.
Read: Phased retirement: Choice or necessity?
When asked about how they plan to fund their businesses, almost half (47%) of Canadians plan to use a portion of their retirement savings. Other sources include savings accounts earmarked for the businesses (43%), bank loans (34%), their inheritances (21%) and family or friends (14%).
BMO offers the following tips to budding entrepreneurs:
Do research: Look at successful business models, gain industry insight and learn about the marketplace beforehand.
Develop a plan: Draft a business plan that takes into consideration your competition, the services you’ll offer, potential customers, sales targets and all potential costs. Consider pros and cons: Think about your ideal retirement lifestyle and consider consulting your spouse, family and friends. Determine why you want to start your own business and how this will impact your retirement goals.
Alternative sources of income: Part-time jobs or contract work are alternatives to managing your own business.
Seek professional advice: Speak to an accountant and a small business banker as they can provide insight into setting up your company, market competition and personal and business capital needs.
Read:
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