Figure out the tab to get going. “Most entrepreneurs grossly underestimate startup costs,” says Pewaukee, Wis., financial planner Kevin Reardon. With less than 20 years to retirement, however, the effects of spending more than you’d intended will be keenly felt. Get a realistic appraisal by talking to owners of similar businesses. Remember, those startup costs include living expenses until you can pay yourself a sufficient salary (a spouse’s job can help).
See what you’ll be giving up. To decide how much skin you can put in the game, “you’ve got to look at the opportunity costs,” says Mary Beth Izard, startup consultant and author of “BoomerPreneurs”. The biggest impact will likely be on your retirement.
Are you willing to live on that or work longer to recover? You may also have to suspend saving for retirement. Halting $15,000 in annual contributions for three years at 50 will leave you with $114,000 less at retirement, assuming 6% annualized returns and quitting at 67, says Alpers. At a 4% withdrawal rate, that’s $4,400 less in year one, more each year as you adjust for inflation.
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