Calculate Your Consulting Rate After Retirement

By Curt Roese | Published: January 17, 2025

Introduction

You've spent three decades mastering your craft. Now you're ready to turn that expertise into consulting income. But when a potential client asks, "What's your rate?" do you have a confident answer—or do you panic and undercharge?

Many professionals over 55 undercharge significantly when they start consulting, often leaving 30-40% on the table because they're guessing instead of calculating. Here's what most don't realize: data from SCORE and U.S. Census sources shows that people 55+ own roughly half of all U.S. small businesses, and research from MIT Sloan shows that a 50-year-old entrepreneur is 1.8x more likely to achieve upper-tail growth than a 30-year-old founder.

Your experience isn't just valuable—it's statistically more likely to succeed than younger competitors.

This guide provides a proven three-step formula for calculating your consulting hourly rate after retirement. You'll learn how to establish your baseline (the math that protects your downside), position yourself in the market (leveraging decades of pattern recognition), and test your pricing (using real client feedback, not guesswork).

Whether you're launching a fractional CFO practice, marketing consulting, or specialized coaching, this formula ensures you're paid what your expertise is actually worth.

Why the Traditional "Salary ÷ 2,080 Hours" Formula Fails Consultants

Most new consultants make a critical error: they divide their old salary by 2,080 hours (the standard full-time work year) and think that's their hourly rate.

This calculation ignores three realities that destroy profitability.

You Won't Bill 2,080 Hours

As an employee, someone else handled business development, invoicing, technology troubleshooting, and administrative tasks. As a consultant, you handle all of that—on your own time.

Benchmarks for solo and small-firm consultants show that, after sales and admin, many bill on the order of 1,000-1,200 hours annually, not 2,080. The rest goes to:

• Business development (20% of time): Networking, proposals, discovery calls
• Administration (10% of time): Invoicing, contracts, bookkeeping, email
• Professional development (5% of time): Staying current in your field
• Unbillable gaps (variable): Time between projects, seasonal slowdowns

Using 2,080 hours underprices your rate by more than 40% before you even start.

You're Now Covering Employer-Paid Benefits

Your corporate benefits package typically added 30-40% to your compensation beyond salary. Now you're paying for:

• Self-employment tax: 15.3% (both employer and employee portions of Social Security and Medicare)
• Health insurance: $600-$1,200/month if you're under 65 and off employer coverage
• Retirement contributions: No more employer 401(k) match
• Professional liability insurance: $500-$2,000 annually for consultants
• Technology and software: What IT provided, you now buy
• Office expenses: Even a home office has costs

The IRS expects quarterly estimated tax payments on Schedule SE (Form 1040), and if you're collecting Social Security before full retirement age, the earnings test may reduce benefits ($1 deducted for every $2 earned above $22,320 in 2024).

You Deserve a Profit Margin

You're not running a break-even charity. Your rate must include profit for the risk you're taking, the capital you're investing, and the value you're creating.

Most successful consultants add a 20-30% profit margin on top of their baseline costs. This isn't greed—it's sustainable business practice.

Step 1: Calculate Your Baseline Rate (Your Walk-Away Price)

Your baseline rate is the absolute minimum you can charge and still stay in business. It's not your target rate—it's your floor.

The Formula

(Target Annual Income × 1.5) ÷ 1,000 Billable Hours = Baseline Hourly Rate

The 1.5 multiplier covers your additional costs (30%) plus a modest profit margin (20%). The 1,000 hours reflects a conservative planning assumption for solo consultants who must handle all non-billable business functions themselves.

Real Example

Imagine you earned $120,000 as a corporate director of marketing. Your baseline calculation:

• Step 1: $120,000 × 1.5 = $180,000 (covering costs and margin)
• Step 2: $180,000 ÷ 1,000 hours = $180/hour minimum

This is your walk-away price. Anything below this, and you're subsidizing your clients with your retirement savings.

Why Conservative Estimates Protect You

As a former CFO, I learned that overestimating revenue and underestimating costs kills more businesses than any other mistake. The 1,000-hour assumption and 1.5 multiplier build in margin for error.

If you bill 1,200 hours instead of 1,000, you've created a profit cushion. If a major client delays payment or a project falls through, you're not immediately underwater.

This formula prioritizes sustainability over optimism—exactly what retirees need when income stability matters more than growth-at-all-costs.

Step 2: Research Your Market Position (What the Market Will Bear)

Your baseline tells you the minimum. Market research tells you the maximum. Your actual rate lives somewhere between these two numbers, determined by three factors: expertise level, industry demand, and problem complexity.

The Experience Premium Is Real

Contrary to Silicon Valley mythology, older entrepreneurs outperform younger ones. MIT Sloan research shows 50-year-old founders are nearly twice as likely to achieve upper-tail growth compared to 30-year-olds.

Why? Pattern recognition.

You've seen economic cycles, managed crises, navigated organizational politics, and solved problems that can't be Googled. Clients don't just buy your time—they buy access to three decades of compressed learning.

How to Research Competitive Rates

Skip general freelancer marketplaces like Upwork or Fiverr. These platforms commoditize expertise and anchor prices dangerously low. Instead:

→ Check boutique consulting firm rate cards: Many smaller firms publish indicative pricing. If they charge $250-350/hour, solo consultants with similar expertise typically price 15-25% lower ($200-275/hour).

→ Review industry association benchmarks: Professional services benchmarks show specialized management consultants often command rates in the $150-300+ range, while generalists typically charge $50-125/hour.

→ Ask peers directly: Informal conversations at industry events or LinkedIn messages to consultants in adjacent niches often yield real numbers. Most established consultants will share ranges if you're not direct competitors.

→ Monitor "Fractional Executive" pricing: Fractional CFOs, CMOs, and CTOs typically bill $250-500/hour for strategic work. If you're offering C-suite level expertise, this is your reference range.

Problem Scale Determines Price

Two consultants with identical credentials can charge vastly different rates based on the problems they solve.

Consider financial consulting:

• Bookkeeping consultant: Organizes receipts, reconciles accounts, prepares basic reports. Rate: $75-125/hour. Solves a $5,000-$10,000 problem (cost of disorganized finances).
• Cash flow crisis consultant: Restructures debt, negotiates with creditors, prevents bankruptcy. Rate: $250-400/hour. Solves a $100,000-$500,000 problem (business survival).

Same expertise base (accounting/finance), wildly different problem magnitude.

Ask yourself: What's the financial impact if my client doesn't solve this problem? Your rate should be a small fraction of that impact.

Geographic and Demographic Nuance

While remote work has flattened some geographic pricing differences, premium rates still cluster in major metros (New York, San Francisco, Chicago) and specialized industries (healthcare, technology, finance).

However, the "silver economy" advantage works in your favor. The number of non-employer businesses (solopreneurs) earning $100,000+ has grown by over 35% in the last decade (MBO Partners), driven largely by experienced professionals leaving corporate roles.

Companies actively seek consultants who understand the 55+ demographic for product development, marketing strategy, and organizational change—and they pay premium rates for that insight.

Step 3: Test Your Rate and Adjust Based on Real Data

Your calculated rate and market research give you a starting hypothesis. Only real client conversations provide proof.

The Close Rate Diagnostic

After your first 10 qualified discovery calls (not tire-kickers, but genuine prospects), calculate your closing percentage:

→ Booking 70-80%+ of conversations: You're likely underpriced. Prospects are accepting too quickly, suggesting they expected higher. Consider raising rates by 15-25% for the next round.

→ Booking 40-60% of conversations: You're in a healthy range. This suggests your pricing is competitive but not a bargain. Continue testing.

→ Booking under 30% of conversations: Before dropping your price, examine your value communication. Are you clearly articulating the problem you solve? Are you speaking to the right prospects? Many consultants lose deals on positioning, not price.

The "Two-Tier" Testing Strategy

Some consultants test pricing using a two-tier approach:

Tier 1 - Standard Rate: Your calculated market rate for typical engagements
Tier 2 - Premium Rate: 30-40% higher for rush projects, strategic work, or clients with complex needs

If premium-tier clients convert at similar rates to standard-tier clients, you've found evidence that your standard rate is too low.

When to Raise Rates (and How Much)

Unlike employees waiting for annual reviews, consultants can adjust pricing with each new client. Common triggers for rate increases:

• After 5 successful client engagements: Testimonials and case studies justify higher positioning
• When you're fully booked: If demand exceeds capacity, raise rates by 15-20%
• When you add credentials: New certification, published thought leadership, or speaking engagements
• Annually for existing retainer clients: 5-10% annual increases keep pace with inflation and your growing expertise

The psychological difficulty isn't the math—it's believing your experience deserves premium compensation. If you've spent 30 years mastering your craft, charging premium rates isn't arrogance. It's accuracy.

Converting Hourly Rates to Retainer Pricing

While this article focuses on hourly rate calculation, many consultants over 55 prefer the income stability of monthly retainers.

The Simple Conversion

If your hourly rate is $180 and a typical client needs 10 hours monthly of ongoing support:

$180/hour × 10 hours = $1,800/month retainer

The advantage: predictable income for budgeting, fewer invoices, and reduced administrative friction.

Project-Based Pricing

Some consultants skip hourly billing entirely and price by project:

1. Estimate hours required (use your hourly rate internally)
2. Multiply by 1.2-1.5 to account for scope creep
3. Present as a flat project fee

Example: A website strategy project you estimate at 20 hours ($180/hour = $3,600) gets quoted at $4,500-5,000 as a flat deliverable.

Clients prefer budget certainty. You're rewarded for efficiency (finish in 15 hours, you still earn $4,500).

Special Considerations for Consultants 55+

Social Security Earnings Test

If you're collecting Social Security before reaching full retirement age (67 for most current retirees), the earnings test matters.

In 2024, you can earn up to $22,320 annually before Social Security withholds $1 for every $2 earned above that limit. This doesn't mean you lose the money permanently—it's recalculated at full retirement age—but it affects cash flow.

Strategic approach: If you're in the earnings test window, consider delaying Social Security or structuring income to stay under thresholds (for example, through S-Corp distributions rather than wages).

Source: Social Security Administration

The Health Insurance Bridge

For consultants retiring between 55 and 65 (Medicare eligibility), health insurance is often the largest unexpected expense.

Options and approximate costs:

• COBRA continuation: $600-$900/month for individual coverage (18-month maximum)
• ACA Marketplace plans: $400-$1,200/month depending on subsidies
• Spouse's employer coverage: If available, often the most cost-effective
• Professional association plans: Some industries offer group rates

These costs are why the "add 50%" multiplier in Step 1 is critical. Underestimate healthcare, and your baseline rate doesn't cover true costs.

Tax Efficiency Through Business Structure

Solo consultants operating as sole proprietors pay the full 15.3% self-employment tax on net income.

The S-Corporation election (consult a CPA) allows you to split income between:

• Salary (subject to payroll taxes)
• Distributions (not subject to self-employment tax)

For consultants earning $100,000+, this can save $5,000-$10,000 annually in taxes—effectively increasing your take-home rate without charging clients more.

Source: IRS Publication 505, Schedule SE (Form 1040)

Frequently Asked Questions

How do I justify my rate to clients who knew my corporate salary?

Focus the conversation on value delivered, not time worked. Your corporate salary reflected 2,080 hours of availability, benefits, and overhead the company managed. Your consulting rate reflects concentrated expertise, flexibility, and results.

Response framework: "In my corporate role, I was one resource among many, spread across multiple priorities. As your consultant, you get concentrated access to 30 years of experience applied exclusively to your highest-value problem. That focused expertise commands a premium."

Should I charge by the hour or by the project?

Hourly billing protects you when scope is unclear or likely to expand. It's ideal for ongoing advisory work, troubleshooting, or exploratory engagements.

Project billing rewards efficiency and provides budget certainty for clients. It works best when deliverables are clearly defined and you have experience estimating effort accurately.

Many successful consultants use hybrid models: hourly for discovery/strategy phases, project-based for execution.

Will my consulting income reduce my Social Security benefits?

If you're under full retirement age (67 for most current retirees), the earnings test applies: in 2024, Social Security withholds $1 for every $2 earned above $22,320 annually.

Once you reach full retirement age, you can earn unlimited income without penalty. Withheld amounts are recalculated into your future benefits, so you don't permanently lose them—but it does affect immediate cash flow.

Source: Social Security Administration, Retirement Earnings Test

What business expenses can I deduct to lower my effective rate?

The IRS allows deductions for ordinary and necessary business expenses:

• Home office deduction: If you have dedicated workspace, you can deduct a portion of rent/mortgage, utilities, and insurance
• Technology: Computers, software subscriptions, phones, internet
• Professional development: Courses, certifications, conferences, books
• Marketing: Website hosting, business cards, advertising
• Travel: Mileage, airfare, hotels for client meetings (with documentation)
• Professional services: Accounting, legal, insurance

These deductions reduce taxable income but don't change your hourly rate calculation. Your rate must still cover expenses before deductions.

Do I need professional liability insurance as a solo consultant?

Yes, in most cases. Errors and omissions (E&O) insurance protects you if a client claims your advice caused financial harm.

Typical costs: $500-$2,000 annually depending on coverage limits and specialty
When it's critical: Financial consulting, HR/compliance advisory, any work involving regulatory guidance

Some clients require proof of insurance before engagement. It's a legitimate business expense that should be built into your baseline rate calculation.

How do I handle clients who want to negotiate my rate down?

First, diagnose why they're negotiating:

• Budget constraints: Offer a reduced scope (fewer hours, narrower deliverable) at your full rate rather than discounting
• Testing your confidence: Stand firm. Experienced consultants rarely discount more than 10% and only for strategic reasons (portfolio building, long-term retainer, referral source)
• Wrong-fit client: Some clients will never value expertise appropriately. Walk away.

Response script: "I understand budget is a consideration. Rather than discounting my rate, let's look at how we can adjust scope to fit your budget while still delivering meaningful impact. Would focusing on X instead of X+Y+Z work within your constraints?"

When should I raise my rates, and by how much?

Timing triggers:

• After 5 successful client engagements with testimonials
• When you're booked at 80%+ capacity consistently
• After adding significant credentials or published thought leadership
• Annually for inflation (5-10% for existing retainer clients)

Magnitude:

• Standard increases: 10-15%
• After major credential/portfolio additions: 20-30%
• When moving from generalist to specialist positioning: 30-50%

Existing client approach: Give 60-90 days notice, explain the increase with reference to market rates and your expanded expertise, and thank them for their continued partnership. Most long-term clients expect reasonable increases.

Conclusion: Your Experience Is Your Credential

You've spent three decades building expertise that can't be taught in a weekend bootcamp or Googled in five minutes. That pattern recognition, contextual judgment, and crisis navigation ability has measurable financial value—but only if you price it correctly.

The three-step formula is straightforward:

Step 1: Calculate your baseline using (Target Income × 1.5) ÷ 1,000 hours
Step 2: Research market positioning through boutique firms, industry benchmarks, and problem scale
Step 3: Test with real clients and adjust based on close rates and feedback

Remember: MIT research proves 50-year-old entrepreneurs are nearly twice as likely to succeed as 30-year-olds. You're not competing despite your age—you're competitive because of it.

Your rate isn't arbitrary. It's math plus market positioning plus testing. The calculation protects your downside. The research positions you accurately. The testing proves what works.

Ready to calculate your rate and start building your consulting practice? The Retirepreneur Hub includes business planning templates, pricing guides, and startup checklists designed specifically for professionals 55+ launching expertise-based businesses.

Subscribe to Retirepreneur Weekly for practical second-act business strategies delivered to your inbox every Tuesday.

Your most valuable chapter is just beginning.

---

About the Author: Curt Roese is a Certified Public Accountant, former CFO, and founder of Retirepreneur, helping professionals 55+ build expertise-based businesses. Learn more about Curt.