When Clients Start an 'Encore Career' in Retirement

"They have built careers, created wealth and reached the point where they technically could slow down, but they realize they are not finished building," he said.

Goodbread said he can relate to that mentality. Near the age of 50, after more than three decades in business, he founded Relentless Value Coaching.

"Experience matters," he said. "By your 50s, you stop chasing everything and start focusing on what actually works. The people who succeed at this stage are not trying to reinvent themselves. They are leveraging decades of wisdom, relationships, mistakes, and pattern recognition.

The biggest difference is purpose, said Goodbread.

"These are not people starting over because they have to," he said. "They are building because they still have something to contribute."

Clients who want to start a new career later in life, advisors say, should think deeply about what type of work they want to engage in and how it will fit in with their tax and retirement planning.

Consulting as a Transition

Jared Machen, partner at Brownlee Wealth Management in Fort Worth, Texas, said he also counsels clients who pursue "an encore career" after retiring.

"It creates quite the whiplash when people go from a demanding executive job to no work," he said.

Consulting is the most common business that Machen said he sees clients start. It leverages their career expertise on a fractional basis.

"This way, they can dial up or down the work as they see fit while still making professional contributions, as they have throughout their career," he said.

While less common, Machen said, clients also start businesses in disciplines that have no overlap with their professional career.

"Many people already have a balance sheet that supports full-time retirement, so the decision to continue working isn't financially motivated," he said.

When Machen models scenarios for clients early in their careers, consulting income is classified as a "slow down" in work if they have no interest in near-term retirement.

"Consulting as a business is great because it's less capital-intensive than a brick-and-mortar business, so they don't have to set aside cash in advance to keep that door open in retirement," he said.

Tax Implications

Dwight Dettloff, a financial planner at Winding Trail Financial Planning in Lafayette, Colorado, specializes in near-retirees and those in retirement, including the self-employed and business owners. Examples of retirees starting businesses include a law enforcement professional who began a training company and a retired nurse who sewed animal pillows to sell.

Taxes are a major concern, said Dettloff, but opportunities exist for those who start a business or become self-employed.

"The one that gets overlooked is the self-employed health insurance deduction," he said.

For some older than 65 and on Medicare, premiums under Parts A, B, C and D may qualify as an above-the-line deduction as self-employed health insurance, said Dettloff.

"This can be handy since it's a cost that's already being incurred by the individual, but now they're able to get a tax benefit," he said.

Another tax-efficient planning tool is using a retirement plan, such as a SEP-IRA or solo 401(k), to help shield some income from taxes or perhaps use a Roth feature.

"This can help with tax efficiency in these self-employed years as well as into the future," Dettloff said.