Starting or purchasing a business is generally viewed as a much riskier proposition than working the steady 9:00 to 5:00 job, with business owners’ savings and equity on the line, fickle customers and market place, loan covenants, tight employee markets, and regulations. However, closer examination of the risks associated with traditional employees may level the risk perceptions of the two career paths.
If you’re between 40 and 50, what are your chances of staying with the same employer on an upward trajectory until retirement? ProPUblica and Urban Institute research finds that 56% of older workers experience at least one involuntary job loss after age 50. They analyzed data from Health and Retirement Study sponsored by the National Institute on Aging and the Social Security Administration. Their report is titled “How Secure is Employment at Older Ages?” The answer: “Not very”
The scary part is if you do lose your job, what’s the chance of finding a similar job competing with younger job applicants? What are the chances that the pay will be par with your current job or better? The report found that only 1 in 10 of older displaced workers ever earn as much per week after the job loss. The importance of ongoing wage earnings until retirement is one of the top determinants of economic stability post retirement. We all fret and stew about potential market losses of our 401K’s, but the level of pre-retirement annual earnings is right up there with the most impact on retirement standard of living. Most people plan on continuing their same work associated earnings until retirement. This appears to be more optimistic than conservative.
Viewed in this light, controlling your own destiny with your own business, especially by purchasing a pre-developed, ongoing, business with a financial history and name recognition that allows you to hit the ground running, may not seem as risky compared to the unknowns of ongoing employment.