You’ve worked hard, you’ve invested well, and now you have the financial means to exit early. While others might be perplexed by the unscheduled blocks of time in retirement, you know exactly what you want to do. For years you squeezed it into the spare hours of your workweek or daydreamed about it at your desk. Now you’d like to turn that hobby or passion into your life’s work.
What can go wrong? Just about anything that hampers a startup. Launching a business is never easy: Around half close within four years, according to the Small Business Administration. But it can be especially difficult for early retirees who allow emotions to trump smart decision-making. “They’re so excited to escape their ‘real job’ that some have a hard time looking at the actual numbers,” says financial planner Chris Dalto, vice-president of Delessert Financial Services in Waltham, Mass.
Unlike younger entrepreneurs, retirees don’t have a long time to recover from a failed business. A money-losing enterprise can eat up savings, force you into debt, and even send you back into the workforce. But intelligent planning can make all the difference between success and stress.
Here are stories of three people who looked at the numbers, planned their exits, and made the transition with ease. The fourth early retiree almost let her passion derail her retirement dream.
THE NOVELIST. Financial planners say it’s a good idea to ease out of your work rather than give it up completely. The strategy worked for Tom Bernard, 51, who liked his job but hated his hours. As head of Lehman Brothers’ ( ) global-credit business, he was routinely pulling 90-hour weeks. That left little time for family, much less writing a novel, his dream since he was a teen.
Bernard didn’t want to give up Wall Street entirely. So he did the next best thing: In 2002 he retired from his full-time management position and cut a deal with Lehman to serve on investment committees and get involved in private equity deals. That freed him up to spend 15 to 35 hours a week writing at his home near Aspen, Colo.
In May, W.W. Norton released Bernard’s first novel, Wall and Mean, a thriller set—where else?—on Wall Street. Fortunately for Bernard, he doesn’t depend on his writing to support himself. Any royalties he may earn will go to charities for autism, a condition that affects one of his triplet sons.
THE WINEMAKER. If you must go, use your professional experience to facilitate the transition, as Duane Hoff did. For 14 years, Hoff and his wife, Susan, juggled their lives as parents and Best Buy ( ) executives. In their spare time they learned about wine together. During a Napa Valley visit in 2001, Hoff read about a vineyard that had just been sold, and he had a revelation: He could afford to buy a winery.
He then methodically researched the winery business, relying on his experience as vice-president for business development and strategy at Best Buy. He hired a consultant who knew Napa Valley, and he retained award-winning viticulturists and winemakers.
He also calculated how much he could afford to spend on land without blowing up his investment portfolio of equities and real estate. He sketched out his business, deciding to sell most of his wine through a mailing list, minimizing the use of distributors. To generate immediate cash flow, he made plans to build a “custom crush facility,” which processes grapes for smaller wineries.
He took his time buying the vineyard. In growing wine grapes, the quality of the land, what the French call terroir, is critical. “I can fix a house, but I can’t fix dirt,” Hoff says. He finally came upon a working winery in St. Helena, Calif., that hadn’t yet sold any wine. After buying the property for an undisclosed amount, the Hoffs dubbed their winery Fantesca and, at age 41, Duane Hoff handed in his resignation to Best Buy. The couple sold their first cabernet in 2005—a critically acclaimed 2002 vintage.
Hoff says the business breaks even. “A winery is not something you buy to make you a ton of money,” he notes. “You have to think of it as a jewel.”
THE BONSAI GROWER. Whatever you decide to do, you need to make sure it doesn’t mess up your retirement plan. Pauline Muth of West Charlton, N.Y., was a junior high school science teacher who also loved shaping bonsai trees. About 17 years ago she registered her home as a nursery and started selling supplies to other bonsai enthusiasts. By the time she retired from teaching six years ago at age 55, she had built a nice little business.
Once she could devote all her time to the enterprise, she considered an expansion. But she and her husband, who was an engineer at General Electric ( ), decided they wouldn’t jeopardize their security by siphoning funds from their retirement accounts. The business “had to be self-sustaining,” Muth says. Now any money she makes from selling the miniature trees and the tools for tending them goes back into the business. She also teaches bonsai classes and hopes to add an online store to her Web site, pfmbonsai.com.
THE BOOKSELLER. Even if you think you have a solid game plan, it’s important not to let emotions get in the way, as Pat Rutledge discovered. When Rutledge, now 63, retired to Leavenworth, Wash., in 1991, ending a peripatetic working life that took her from journalist to housewife to print-shop employee to editor-in-chief of trade magazines, she fulfilled a childhood dream of owning a bookstore. Her husband, Ed, a national sales manager at Hearst Corp. with Army and company pensions and a six-figure nest egg, supplied the $75,000 needed to open A Book For All Seasons. Over the next eight years, Rutledge’s business slowly grew. But in 1999 she lost her lease. With new space unavailable, she came up with a solution that went against the advice of friends and family who probably knew better: She bought a struggling restaurant for $30,000, downsized it to a cafй, and used the rest of the space for her bookstore. It was a bust. After burning through $102,000 in a year, she coaxed Starbucks ( ) into taking over the cafй. She kept the bookstore.
The Rutledges have since diversified. Pat maintains a literature-themed inn above her shop and runs a summer camp for young book lovers. Ed opened a boutique winery, Eagle Creek, where he crafts cabernets, rieslings, and chardonnays, among others. “It was a little rough,” Pat Rutledge says, but “if you’re doing what you love, you can put up with a lot.”
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