Entrepreneurship takes a big jump at age 65. Guess Why?

[eridani]

Health Coverage a ‘Gift' to Ourselves
http://www.nationofchange.org/health-coverage-gift-ourselves-1353429748

One of the more curious “gifts” in Mitt Romney's list of ways Barack Obama allegedly bought off voters was letting young people up to the age of 26 stay on their parents' health plan. It was a gift, all right, a gift to America.

How so? Consider this finding in a RAND study on whether employer-based health insurance is a barrier to entrepreneurship: The rate of new business formations jumps at or around age 65 (particularly in the month that the person turns 65). What happens at age 65 is that Americans qualify for Medicare.

The authors of the study (Robert W. Fairlie, Kanika Kapur and Susan M. Gates) found the spike in business starts by those around 65 to be the purest evidence of "entrepreneurship lock" — the notion that many would-be entrepreneurs stay stuck in jobs for fear of losing health coverage.

[peacebird]

1. Health care coverage is why hubby & I can't retire sooner

[SunSeeker]

52. Same here. My spouse and kid depend on my coverage too. nt

[femmocrat]

59. Same here. n/t

[AAO]

67. Ditto. (I'm taking it back from limpdick)

[Scuba]

2. Too easy! Employer-based health care is dragging our country to the bottom.

[salinen]

18. Well said

Universal coverage would cause a boom in business.

[femrap]

30. +1 nt

[Tumbulu]

44. So true!!!!! nt

[loudsue]

48. Yep! n/t

[RiverSong]

49. US Healthcare system is a joke to the rest of the world. nt

[caraher]

3. I'm glad there's a study on this

I've long felt that guaranteed health coverage would be an enormous boon to creativity in our economy, and this backs up my hunch.

[annabanana]

4. Of course it does!

This is a narrative that has been so roundly ignored in the media and nf Capitol Hill that it's a wonder that we've figured it out.

Thanks, Big Pharma & Big Insurance!

[trotsky]

5. This should be so mind-numbingly obvious that even Republicans can't deny it.

If they truly are the party that supports entrepeneurship and small business, that is.

[JustABozoOnThisBus]

7. If Republicans can deny Evolution and Global Warming, they can deny this.

They start businesses because they are retired and have time to listen to Limbaugh and O'Reilly.

That makes them smart.

[salinen]

19. mind-numbed

that's why they can't see anything.

[Tumbulu]

45. so true !!! (nt)

[quaker bill]

6. I actually started my business (very part-time) at 53

In hopes that at 65 it will be big enough that I can retire to it.

[aletier_v]

8. That's quite interesting. That's a lot of my motivator now.

I've had constant problems with my health insurance since 2008,
so on advice of another unemployed ex-military guy,
I got myself back into the VA system.

I foolishly thought I was done in 2011 and dropped out,
but now I'm having to get back in again.

[fasttense]

10. If it were not for my military health care

We could not have started CedarSide Farms. Now I get to grow mushrooms, pasture raise lambs and free range chickens.

[Honeycombe8]

9. That is me. I'm 58. I'm in essence a serf....tied to my job for ins. coverage.

If it weren't for that, I could change to a job I enjoyed more (if someone would hire me!). I could maybe even work part time, or start my own small business, or whatever.

But I can't afford to pay for ins. coverage.

[PrMaine]

14. At 58, a Better Job is Highly Unlikely

At 57 I had been working for the same company for 16 years and was fairly happy with it. The work was sometimes very interesting though more times a bit dull. Still, it paid well and I had good benefits.

At 58 I was laid off. Trust me, even in better economic times the only jobs for someone that age are apt to be menial and without benefits - meaning no health care. I started up a small business and it made some money, but not really enough to pay for health insurance.

There are not many alternatives at this stage in life - if you can keep your current job do it. The alternatives are not apt to be very attractive.

[Honeycombe8]

16. Thanks for the advice. Yes, I'm hanging in there. That's why it's so important...

for the ages of SS and Medicare not to go up. I have six or so more years before I get Medicare. You know, like you, it's not always up to US on when we stop working. If I get fired, I'd be in trouble.

If I were to get laid off, like you were, I would end up using my life savings (for retirement) to pay for ins. now. Ins. is so expensive. At least I'm healthy....so far.

Are yu able to get insurance? The exchanges and subsidies are not going to be available until 2014, I think.

[PrMaine]

24. Getting Insurance

My job was in California but that's an expensive place to live without good income. But one thing that made it prohibitive to live there was that health insurance would have been more than my $1800 a month mortgage.

In Maine I was able to get a high deductible policy for just a couple hundred dollars a month - it basically served to limit my liability for medical care. Fortunately, I never had to test it but it was supposed to pay for everything beyond $10,000 a year for me and beyond another $10,000 a year for my wife. That was a calender year so I suppose an accident late in the year could have cost me $40,000.

I'm on Medicare now so I've stopped worrying about it. As you say, this talk about raising the retirement age always seems to assume that there are lots of good jobs for people in their 50's and 60's and that just isn't the case.

[rational_pi]

11. True

For years I toiled working for big DOD companies, all the while thinking I can do better and be more efficient if I was on my own. But there was noway I would risk losing health insurance for myself and the family. So I had to keep my job and worked on my start-up.

[shawn703]

12. I think that's a tad oversimplistic.

Now I'm all for universal health-care, even Medicare for All, but at 35 years of age it's not just health care that would worry me about striking out on my own. Seniors can also take advantage of their SS benefits and any other retirement they have saved up, and if their business has a down month they at least know they can pay their bills. In other words, they can tap into their retirement because that's what it's meant for.

[eridani]

13. True--SocSec is also a helpful backup

Also, many have paid off their houses by that age.

[jeff47]

17. People aren't eligible for Social Security until 66 now.

It's on it's way to 67 in 2027.

So a burst of entrepreneurs at 65 can't be explained directly by Social Security - the idea that it's coming in a year may be comforting, but it won't pay today's bills. Sure, they could "retire early", but that's gonna screw them for the rest of their life.

[DavidDvorkin]

29. No, they're eligible at 62

But at a reduced amount. 66 is the age when they get full SS (although that depends on when you were born; it's 67 for younger people).

[jeff47]

33. Yes, as I said in my post about retiring early.

But there's a little problem with that: these people aren't retired. They're starting their own business.

The feds kinda frown on Social Security fraud.

[DavidDvorkin]

36. That's not fraud. You don't have to be retired to start taking SS.

You can still be working. Perfectly legal.

[jeff47]

37. Only if they aren't very successful.

http://www.socialsecurity.gov/retire2/whileworking.htm

[DavidDvorkin]

38. Sure, and I was subject to that for a while

But taking SS while still working can still be advantageous to a lot of people, especially those who take the chance of quitting a job with a good paycheck (or get laid off from such a job, as was my situation) and then take the entrepreneurial path.

Which is where this whole discussion started.

[jeff47]

39. I suspect that the majority would rather delay taking SS and get more for the rest of their life. nt

[DavidDvorkin]

40. Ideally

That was my intention. Reality intervened.

Even for those aren't laid off, many people weigh the extra money in the monthly SS check vs. grinding along doing work they dislike or hate and not doing what they love, and decide to go with the lower monthly check. I've known other people in my age group who've made that decision, and they don't regret it.

[mythology]

55. Considering that most small businesses take a while to turn a profit

the ability to use Social Security to help cover the gap in income is a smart idea.

I don't think that there's a way to estimate exactly what factors influence people to start a small business at a particular age. There are a lot of potential factors to consider and at least the summary article doesn't actually really consider any of them because they have a conclusion and are crafting the story around the conclusion rather than the conclusion around the evidence.

For example, they talk about how you shouldn't consider the additional revenue streams such as Social Security, pensions, 401ks etc because that money would possibly make the person retire and do nothing. But there's no actual evidence presented either way to support or disprove the theory.

Or in the section where they note that people in their 40s and 50s are least likely to start a business they chalk it up to note wanting to risk a child's health insurance. But they don't talk about the fact that small businesses often don't create a profit in the first year or two. It's hard to feed your kids on just future potential profits. Additionally most people have taken on mortgages and are in their relatively highest income growth levels at that point.

There are plenty of good reasons to support single payer universal health care. Unfortunately this article doesn't actually go into them.

[femmocrat]

60. OK, I read that, but have no idea wtf it means.

If I am still working at age 66, can I receive my full SS benefit??? I may never retire!

[Egalitarian Thug]

65. Depends on when you were born. I'm of the slice that already had our age raised to 67. n/t

[JackRiddler]

57. Correct. Obviously it's because of retirement age...

They drop their jobs and get their savings and pensions (if so lucky) and try their hand at business, it's not so shocking and Medicare is part of it no doubt but only one part of it. How much you have in the IRA or other retirement device is more of a factor - the capital for this business. How do they end up is more the question? (Half of new businesses fail, etc.)

[Egalitarian Thug]

64. Also you will note from the story that "entrepreneurship" begins to rise at 55,

just at the time that the winners are getting bored with golf and the losers find that no one will hire them.

[Turbineguy]

15. It's also when they have to deal with

management having looted their pensions.

[yardwork]

20. I've been saying this for years. The #1 barrier to entrepreneurship is lack of health insurance.

All over the country people are spending millions of dollars trying to figure out why Americans aren't more entrepreneurial, trying to teach people to start their own businesses, trying to "transform" educational systems to encourage entrepreneurship among young people.

All that time the white elephant (and it is an elephant and it's mostly white, ie., it's the Republican Party) is blocking the single most important factor that would encourage people to start their own businesses. Expand Medicare to cover everybody, guarantee universal access to health care, and watch small businesses in America boom.

Big corporations don't want that.

[Tumbulu]

46. I have also been saying it for years

and cannot understand why it is not obvious to everyone. Why was a study needed? Glad that for those who cannot open their eyes there is a study to prove what everyone already knows.

[yardwork]

54. I don't understand why it isn't obvious to everybody, too. A huge number of people don't get it.

I think that many of the people who plan these entrepreneurship programs have been covered by employer-sponsored private insurance all their lives, and they don't realize how rare that is. Significantly, people who are employed by the government have pretty good health insurance. They're the policy makers, and many of those people don't have a clue how everybody else lives.

[Javaman]

21. Like I said to a coworker, just imagine a nation where people have free health care, then imagine

what those same people who are chained to their jobs to maintain their health care would suddenly do?

Myself, I would quit my fucking job and go back to school for Chemistry.

[closeupready]

22. Of course. Been saying this for years. Nobody with a job

is going to start up a full-time business on their own with health insurance/access as unaffordable as it is.

[MineralMan]

23. Health insurance is one reason, for sure.

Another is the steady income from Social Security. That allows many people who are aged 65 and up to start a small business without the constant worry of basic survival income every month. Especially at the initial launching of a small business, it can be hard to pay yourself. That Social Security deposit every month helps. Finally, with jobs for older people being very, very hard to come by, many seniors start businesses so they'll have work, since Social Security isn't enough to live on in most cases, and since a small business doesn't have to be very large to provide the additional income.

I'm 67. I'm back in the workforce, but with a new small business. I've always worked for myself, but Social Security isn't enough income. So, I fired up a new small business to fill the gap. Works great, and I'm still working for myself. The Medicare deal is great, too. Before I turned 65, my health insurance premium was almost $1000/month. Now, it's lots less.

[Kber]

25. A third reason is that by 65ish, people have acquired the skills to strike out on their own

You know your industry, your environment, and you have "life skills" that make you more likely to be successful. You have invested time and have become "an expert", even if it's not in your new chosen business.

Add to that additional economic security and, of course, Medicare, and it makes it a whole lot easier than it would be at, say 40.

[mopinko]

26. al gore tried to tell people that.

news from the department of duh.

[shireen]

27. exactly!

Imagine how innovative and competitive we could be if we weren't tied to the lead ball called health insurance that's most affordable for medium- and large companies. We're prisoners.

We can lead much richer meaningful productive lives when everyone is covered by Medicare!

[mwooldri]

28. If I could be assured of health care for me and my family...

... then I would take that route. Right now it is working in a specific job. If it wasn't tied to my job, I'd consider an own business, scaling back my regular work hours, things like that.

No health care guarantee means I do what I have to do.

[Samantha]

31. I started my own health and nutrition distributorship in August AND I LOVE IT

I have a strong work ethic and I have had some top-notch jobs. Most of them were tremendously stressful. I stayed in that field because my daughter was attending a music conservatory and I needed the money to put her through. Conservatories are extremely expensive, and people who go there to teach music often go 5 years. They have to learn all the instruments they are going to teach. It took me ten years to pay off all my loans for her education.

So now I work for myself from home, I love the business of helping others, it gives me great joy and happiness and I never have to worry about losing my job. Best of all, no office politics.

The only thing I regret is that I did not start this on a part-time basis while I was working because I could have had my customer base built up and all the training finished when I left the orthodox business arena.

So if you are reading this perhaps you should give some thought as to trying an online business when you reach that point in life you can work it. You also have no commuting costs and you can work in your pajamas if you so desire, setting your own hours.

Happy holiday, everyone.

Sam

[ThoughtCriminal]

32. Corporate America does not want "Entrepreneurship"

They want less competition and a compliant workforce. Employer based health insurance helps keep workers dependent and afraid.

[Duer 157099]

34. Exactly correct

They want to own the intellectual property of their workforce. It is very simple and obvious.

[ElboRuum]

62. You win the thread.

+10 internets to you sir/madam.

[jtuck004]

35. "... We were concerned about other confounding factors that might lead to shifts in

employment behavior at age 65 such as eligibility for Social Security or for pensions.
Zissimopolous and Karoly (forthcoming) find that among individuals over age 50, those who had
experienced a pension cash-out were more likely to transition from wage and salary work to selfemployment.
Social Security eligibility does not appear to generate shifts in employment
behavior precisely at age 65. The minimum retirement age for full Social Security benefits was
65 for individuals born in 1937 or earlier (i.e., those reaching eligibility before 2003) and is
gradually increasing for later birth cohorts to age 67 for those born after 1959. The earliest age
of eligibility for Social Security benefits is 62; benefits received by individuals at that point are
reduced (in an actuarial neutral way) relative to what would be received if one were to retire at
the full retirement age. Data reveal that individuals are far more likely to begin claiming benefits
at age 62 than at age 65. A majority of Americans (59 percent of women and 56 percent of men)
receiving Social Security benefits for the first time in 2004 were age 62. A smaller fraction of
those claiming benefits (17 percent of women and 23 percent of men) were age 65 (Munnell and
Sass, 2007). Similarly, age 65 does not appear to be a primary focal point for the accrual or
availability of pension wealth. Under defined contribution retirement plans, pension wealth
accrual does not vary substantially by age; pension wealth continues to increase as long as a
person works. The critical age for individuals covered under defined contribution plans is 59.5
because at that age individuals can begin withdrawing from a 401(k) without penalty (Friedberg
and Webb, 2003). Under defined benefit plans, pension wealth accrual peaks at the age of early
retirement eligibility, which is well before age 65. Pension wealth may continue to increase up to
age 65 (Friedberg and Webb, 2003; Poterba, Venti, and Weiss, 2001).

A paragraph from that study, here.

So while it looks like they have some source of income, small, the availability of health insurance appears to be the thing that causes them to finally pull the trigger.

I read through it briefly, but I don't see yet if they identified people by whether SS was the only source of income for what percentage of business starters. According to the SS admin, a little more than 1 in 4 (now likely higher) people have virtually no other income than SS. I wonder if they are more or less likely to try this, since in most cases, except for some service businesses, they must also have at least a little capital to can invest.

[jmowreader]

41. Americans also retire then

I think everyone has an idea for a business they would like to start. Most people have a survival mentality and fear the unknown - "if I quit my job and start a business how will I pay my mortgage and buy food?"

Retired people with pensions don't have that problemp.

[johnd83]

42. I am working on a startup by myself at the moment

and health insurance is a huge problem for entrepreneurs. I am lucky that I have COBRA until Jan 2014. My parents and I (I am still single) were holding our breath about obamacare because I will probably have to give up and get a corporate job if it is repealed. All of these GOP talking points are nonsense about how the Obama policies are hurting small business activity. I need to have the corps paying the same tax rates as I have to as a small LLC and have startup grants available to help get over the "valley of death" for new technologies (google it). The GOP policies would crush my small tech business.

[RainDog]

43. I've long said that tying health insurance to a company undermines entrepreneurship

It has always puzzled me why a political party that claims to be pro-business works so hard to make it difficult to start your own b/c of this very issue.

[Politicub]

47. There is going to be an entrepreneurship boom in 2014

Thanks to the AFA.

[radhika]

50. Duh! My story completely

I am thrilled to be on Medicare, able to explore options, returning to independent consulting or whatever.

Lots of my age-group allies were hanging on to a dead-end position, just waiting for that magical day to arrive.

[madrchsod]

51. i`m thinking about going back into the reupholstering business

did this in the 80`s and it paid the bills. now that i don`t have to worry about healthcare i can pick what i want to work on.

[Faryn Balyncd]

53. How to MASSIVELY increase entrepreneuship in ALL age groups: Universal Medicare for All !

(Not to mention making American businesses much more competitive in general.)


Let's face it: The Republicans are the anti-entrepreneur, anti-business, anti-American party.


The only thing they stand for is a larger slice (of a smaller pie) for the 1% (which they dress up with hollow pseudo-free enterprise slogans.)

[JoeyT]

56. Well yeah, even Republicans know that.

That's why they oppose anything that remotely resembles health care for all. They don't want you to be able to head out on your own, they want your employer to be able to hold you and your family hostage.

[limpyhobbler]

58. It's so sad to see America falling behind on the health care front.

It's truly a failure of leadership.

[Egalitarian Thug]

66. We've been steadily losing ground for 30+ years. Our powerful propaganda machine has

simply made it possible for us to ignore it. We are so far behind the rest of the developed world that, even if we had the understanding and the will, it would take 2 or 3 generations to catch up.

[ElboRuum]

61. Doesn't shock me in the slightest.

Entrepreneurship carries with it great financial risk. It isn't nearly as easy or fun as the Republican old-money-babies who have never been entrepreneurs seem to want to claim.

I don't remember where I read these stats at one point in the past, so if I have them wrong, please forgive and if possible correct, but at one point it was estimated that 4 out of every 5 startups fail within the first 5 years. Moreover, this failure is as likely to be caused by market forces or unforeseen obstacles as much if not moreso than a failure based on the entrepreneur's capacity, knowledge, or hard work (lack thereof). What I take away from that is no more than a 20% likelihood of success even if you know what you are doing.

The statistics went farther, stating that of those 1 of 5 which survived the 5 year mark, of the remaining, 4 out of 5 will fail within 10 years for similar reasons. So that means that there is no more than a 4% likelihood of success past 10 years even if you know what you are doing.

With a failure is the potential for financial ruin, since any debt you may have accrued in the execution of your startup will still need to be paid. There is bankruptcy, but that carries with it its own set of problems. With financial ruin comes the inability to provide for your own health care, which can throw you into a hole so deep you may not be able to climb out in your lifetime.

It's the equivalent of jumping out of an airplane at 15,000 feet without a parachute and trying to land on a target which is 20 ft square, but contains a substance which will arrest your fall without injury. If you are successful, you win a big financial prize. Miss and you're a mascerated crimson mess.

If you have health care provided by an employer, you probably see that as more important than your wage especially if you have a family dependent upon it. Very few people are willing to risk the jump given the odds and looking at the price of failure.

Take health care out of the equation, and this is the equivalent of giving a parachute to the jumper. The odds of hitting the target remain the same, however, failure does not necessarily mean financial ruin. Whatever else happens, health care costs cannot be that which drowns you in debt. It's all the impetus those would-be entrepreneurs need to bug out of the rat race and seek their own fortune.

If Republicans really value entrepreneurship, they would be the first to embrace single payer so as to encourage it. But, of course, well, that's not what they value, second verse same as the first.

[left lowrider]

63. Same here but I have 20 years to go

My wife had cancer so I can't risk loosing health insurance or being able not to afford it for even a brief time.
I am world famous in my profession, I win awards and magazine covers all over the world with my projects and yet-every day I go to work at a corporate day job for the health insurance, The numbers don't add up if I have to buy an individual policy with pre-existing conditions and kick off my own business at the same time. If insurance was assured I'd open my own office tomorrow and hire employees.

There are a lot of us who are slaves to health insurance I suspect.