In The Headlines

More Senior Americans Choose Entrepreneurship as a Second Act

Kimberly Palmer, author of The Economy of You: Discover Your Inner Entrepreneur and Recession-Proof Your Life said she has noticed that the most eager audience for her book is comprised of people approaching or already in retirement. ”They want to leverage their skills and experience into something entrepreneurial,” she said.

According to a recent study published by the Kauffman Foundation and Legal Zoom, in 2013, about 20% of all new businesses were started by entrepreneurs aged 50 to 59 years, and 15% were launched by people 60 and over. In fact, over the last decade, the highest rate of entrepreneurial activity belongs to those in the 55-to-64 age group, according to the Kauffman Index of Entrepreneurial Activity.

A desire to work for oneself and create a business that is meaningful and has social impact at this stage of life, combined with a job market that makes it tough for workers over 50 to get hired, has clearly pushed more people to pursue the entrepreneurial path.

”For the longest time we’ve assumed that social entrepreneurship was the exclusive provenance of young people,” said Marc Freedman, founder and chief executive of Encore.org, the nonprofit research center dedicated to second careers aimed at serving the greater good. ”Now we’re realizing an undiscovered continent of innovation in the growing population over 50.”

But entrepreneurship is not an easy road. Money is the biggest stumbling block. Most start-ups like Ms. Arnold’s are underwritten with personal savings. If someone does not have savings to tap, or a partner who is still bringing home a paycheck, it is difficult to get started. And many entrepreneurs do not pay themselves for a year or so to allow their businesses to gain traction. That said, many small and microbusinesses, particularly freelance, home-based, and online e-commerce businesses, require only a fraction of that to get going, often less than $1,000.

However, where there is a will, there is a way. Determined older entrepreneurs have tapped retirement accounts, tracked down hard-to-get economic development loans in their communities, and turned to crowd funding sites.

An upcoming Senate hearing titled ”In Search of a Second Act: The Challenges and Advantages of Senior Entrepreneurship,” will offer participants a chance to air issues like age bias from lending organizations and the need to develop tax incentives for training and start-ups.

”In order to continue our economic recovery, we need to change how we view the terms start-up or entrepreneur,” said Senator Mary L. Landrieu, chairwoman of the Committee on Small Business and Entrepreneurship. ”Most people associate those terms with a tech business and a young computer whiz, not a home business in a rural town and a seasoned executive with 30 years of management experience,” Senator Landrieu said. ”Senior entrepreneurs are especially critical to creating jobs and growing the economy, because they have the right experience and resources to be successful.” Senator Landrieu said she hoped the hearing would showcase successful initiatives and discuss whether they could be replicated elsewhere.

Wooden Cars

At the Geneva International Motor Show in March, Finnish papermaker UPM-Kymmene (UPM) will showcase a prototype of a wooden car with a frame built from tree pulp and plywood. UPM’s Biofore concept car meets all European crash and fire safety standards and offers all the features of a conventional car. “We wish to demonstrate that these materials respond to the needs of the automotive industry,” says Juuso Konttinen, UPM’s vice president for new business.

The Helsinki-based timber company sees wood as a viable option to replace heavy steel components in cars. The biggest challenge is forming body panels that are rigid enough to meet safety requirements.

UPM is talking to several automakers about adopting its technology, which uses heat-shaped plywood and pulp fiber to reinforce plastic car parts. The materials are competitive with other composites, such as fiberglass, and can reduce a car’s weight by more than 15% which is critical for fuel efficiency.

“The more expensive energy becomes, the more likely this type of trend will continue,” says Joe Harmon, the designer of the wood-based Splinter, a concept car made in 2008 to demonstrate wood’s potential. There are benefits in manufacturing as well. Wood uses very little energy in the manufacturing process when compared with aluminum, steel, and carbon fiber.

Automakers are starting to use lighter materials to improve efficiency. Ford Motor’s F-150 pickup truck, the best-selling vehicle in the U.S. for the last 32 years, will soon become the first high-production vehicle with an aluminum body when the 2015 model arrives in showrooms later this year. Volkswagen is using more aluminum and high-strength steel in its cars, and BMW is turning to carbon-fiber bodies to reduce weight. Renault plans to replace as much as 10% of the plastics in its cars with plant-based materials. They will use hemp fibers in body panels and trim as well as cushion material from soybeans.

Founded in Finland in the early 1870s, UPM has struggled with a global decline in newsprint demand for almost a decade, so it aims to diversify into areas such as biofuels, wood-sourced composite materials, and chemical additives made by breaking down pulp to microscopic dimensions. All of these areas are in alignment with the needs of those automakers now looking at wooden cars as their own “back-to-the-future” moment.

The world’s first cars, including Gottlieb Daimler’s 1885 two-wheeled Reitwagen, were largely made of timber. But rising production volumes in the 1920s made wood difficult to work with because of natural variations, such as knots. Over time, steel’s strength and reliability relegated wood to veneer accents on the dashboards of luxury cars. British sports car maker Morgan Motor Company is a rare exception—it has been using ash frames in its vehicles for decades.

Still, wooden car developers face significant hurdles. Carmakers have equipped factories with costly stamping machines, and their engineers and designers are experts in metal engineering and production. The extra investment in equipment and know-how to introduce plant-based materials might be more than they are willing to take on right now.

UPM and its partners, including Helsinki Metropolia University of Applied Sciences, are betting the Biofore prototype can change the mindset of automakers. The first test drive of the wood-framed vehicle was conducted in pouring rain in August to dispel concerns about the car’s ability to handle water. And, unlike wooden cars of the 1940s and 1950s, the car itself does not look like it is made from trees. UPM technicians and designers have worked to create the impression that, while the car is eco-efficient, it looks like other cars on the road.

Sources:
1. http://www.cnbc.com/id/101400806
2. http://www.businessweek.com/articles/2014-02-06/wooden-car-designed-by-finnish-papermaker-upm#r=nav-f-story

The Good News Is . . .

• The January jobs report showed that 113,000 workers were hired on nonfarm payrolls last month, below the consensus Wall Street estimate of 180,000. The unemployment rate unexpectedly fell to 6.6% from a December reading of 6.7%. The labor force participation rate rose to 63.0% from 62.8%. Private-sector firms hired 142,000 workers, which meant there was a reduction of 29,000 government employees. Jobs growth was reported in both building and manufacturing. Read more: http://www.businessinsider.com/january-jobs-report-2014-2#ixzz2slVCG55w

• Dunkin’ Brands Group, Inc., a leading franchisor of quick service restaurants serving coffee and baked goods, reported earnings of $0.43 per share, a 26.5% increase over year-ago earnings of $0.34. The company’s earnings topped the consensus estimate of analysts by $0.03. The company reported that revenues were $183.2 million, up 13.3%. Management attributed the company’s performance to growth from new restaurants as well as continued strength in its Baskin-Robbins ice cream store sales.

• Smith & Nephew has announced a definitive agreement to acquire medical device company ArthroCare Corp. for $1.7 billion. The acquisition will be subject to approval by ArthroCare’s shareholders and clearance by the government. In announcing the deal, Smith & Nephew management said it believed the acquisition of ArthroCare’s technology and highly complementary products will further strengthen its sports medicine business.

Sources:
1. http://www.businessinsider.com/january-jobs-report-2014-2
2. http://www.bls.gov/news.release/empsit.nr0.htm
3. http://www.cnbc.com/id/18080780/
4. http://investor.dunkinbrands.com/releasedetail.cfm?ReleaseID=823713
5. http://www.streetinsider.com/Mergers+and+Acquisitions/Smith+%26+Nephew+%28SNN%29+to+Acquire+ArthroCare+%28ARTC%29+in+%241.7+Billion+Deal/9114755.html

Planning Tips

Tips for Setting up a Qualified Terminable Interest Property Trust

If you are part of a family in which there have been divorces, remarriages, and stepchildren, you may want to have more control over how your assets are directed to beneficiaries, especially children or grandchildren. One option available to you is a qualified terminable interest property trust (QTIP). Below are some tips to better understand how this type of property trust works and whether it might make sense as part of your estate planning.

What is a QTIP? This type of trust enables the grantor (the individual setting up the trust) to provide for a surviving spouse and also maintain control of how the trust’s assets are distributed once the surviving spouse has also died. Income, and sometimes principal, generated from the trust is given to the surviving spouse to ensure that he or she is taken care of for the rest of his or her life. However, you maintain control of the trust’s distribution even at that point, per your specifications made at the time you set up a QTIP.

Who commonly uses a QTIP trust? This type of trust is commonly used by individuals who have children from another marriage. QTIP trusts enable the grantor to look after his or her current spouse and ensure that the assets from the trust are then passed on to beneficiaries of his or her choice, such as the children from the grantor’s first marriage.

How does a QTIP trust work? In its most basic form, a QTIP trust is essentially a more restrictive form of the typical marital trust. Upon your death, your spouse has the right to use the property in the trust. In most such trust arrangements, the marital portion of the trust is fully accessible by the surviving spouse. On the other hand, a QTIP trust provides limited access to the trust assets for a surviving spouse. Although your spouse may receive income from the trust, he or she cannot decide on the ultimate disposition of the trust assets and cannot withdraw principal from the trust. However, the QTIP trust can be written to provide the greater of $5,000 or 5% of the trust assets to your surviving spouse annually if you wish. Upon the death of your surviving spouse, the trust is distributed according to your ultimate specifications.

How does a QTIP trust work to defer estate tax? A QTIP trust does not eliminate estate tax. It postpones the estate tax until the death of the second spouse. If you create a QTIP trust, then at your death no estate tax is due on the assets that go into the trust. The assets qualify for the unlimited marital deduction, which lets all property, regardless of value, pass to a surviving spouse free of estate tax. You can get the estate tax benefits of a QTIP trust only if your spouse is a U.S. citizen. The marital deduction (the rule that lets surviving spouses inherit any amount from the deceased spouse free of estate tax) is key to the QTIP, and it does not apply to noncitizens. At the death of the second spouse, estate tax is due on all of that spouse’s property, including the assets that were held in the QTIP trust.

Sources:
1. http://www.investopedia.com/terms/q/qtip.asp
2. http://money.cnn.com/retirement/guide/estateplanning_trusts.moneymag/index2.htm
3. https://www.wilmingtontrust.com/wtcom/index.jsp?fileid=3000306
4. http://www.dummies.com/how-to/content/how-marital-trusts-work.html
5. http://www.nolo.com/legal-encyclopedia/qtip-trusts.html
6. http://beginnersinvest.about.com/od/estatetax/f/qtip.htm

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