Part V: Working in Retirement
Retirement as we know it is a function of the Industrial Age, the one we left behind in the 20th Century, where the age of 65 vis-a-vis one’s expected life span was really no more than a one or two year bridge as many workers physically outlived their usefulness. Thus it is interesting that retirement as an institution still drags around with it many of the same features of a bygone era, and the perception of it by many people is still framed by an old paradigm.
If you’ve been following along in our discussion of the past few months, I have been trying to make it clear how this Baby Boomer generation is throwing off the old ideas and reinventing a retirement that will fit the Information Age. In no one area is this more relevant than in the concept of continued work in retirement. These are the facts: We’re going to live longer than our parents; we are going to be more active; and, statistically, we are going to be less financially prepared. What this all adds up to is a concept some analysts are calling the Third Age- figuring out what our “careers” in retirement are going to be. But it’s important to frame the discussion between the option of work and its financial necessity. In his book “The New Retirementality”, Mitch Anthony introduces Maslow’s Hierarchy of Needs into the discussion of retirement and how people plan for each layer of the pyramid, from Survival Needs to Safety Needs to Belonging Needs and ultimately to Self Actualization. For those people who continue an attachment with the labor force into their senior years, we will all fall somewhere along this spectrum. But as a social phenomena, retirement is going to evolve into to something we may not currently recognize, and as modern generations change so employers, institutions, governments and the virtually the entire face of society will have to change with along with them.
When I sat down to write this, it struck me how strange it would feel to prepare for a second career down the road (I’m 42). After all, I’ve put enough work and schooling into this one. And having my own private practice, I’m planning and hoping its something I can continue to be involved in after I step away from the day to day steering of the ship- although not full time, of course. This is actually the course many small business owners take as they divest themselves financially and emotionally from the businesses that they help build. But my passion is writing. I’ve written short stories and have had many articles published, but whether I could make a compensated second career out of it remains to be seen. Experts in this field have coined a new term called “Fantasy Careers”, where a new wave of consultants have stepped in to help those who for some reason or another were unable to find this Nirvana during their peak earning years but who plan on incorporating it in their vision of retirement. It usually begins with a frank self-assessment, the kind of soul searching that people busy with the demands of daily life usually put off. In many ways it’s not unlike career counseling if you had a “do-over” for your career. In one consultant’s workshop entitled “Retiring Backwards”, they ask people to list the passions they would most like to pursue, and the talents they would most enjoy using. For some, the results point to a switching of fields altogether; for others, it may mean turning a hobby or interest into something that’s cash flow positive or translating their skills into their own business. Some of the most widely used tests designed to help people hone in on their skills and interests include the same ones used for college students, like the Myers-Briggs Personality Type Indicator and the Strong Interest Inventory.
If a fantasy career is out there for you, experts recommend you begin “test-driving” your new career sooner rather than later because by the time you reach the actual of age of implementing your plan it may be too late. One story I recall was of a software engineer in Silicon Valley who wanted to become a flight instructor for a special type of aircraft. He logged his numerous required flying hours and teaching credits and did all over his lunch break. It took him 3 years. Test driving will show you need to have, needed to know, contacts, networking, and finally if it’s really even the thing you think you want to do. A fellow financial planning colleague in California recently was quoted saying his work in this area was “helping people transition from high-paying crappy jobs to crappy-paying great jobs!” In other words, even if you are under-prepared financially as many Baby Boomers are, the goal at this stage is to augment your various sources of retirement income, not to replace your peak earnings capacity, while doing something you love.
Another goal for many is to pursue their passion by opening their own business. After years or decades spent working for someone else, the urge to follow a dream into your own venture can be very alluring, and I’ve had many clients smitten with the entrepreneurial bug while living in corporate reality. This particular plan needs to be addressed even earlier and more carefully than a second fantasy career. The truth is that over one third of small businesses fail in the first few years, and this statistic doesn’t change just because it’s following your primary career. In fact, the financial aspects are perhaps even more crucial as it runs a high risk of putting your nest egg in jeopardy, and the time you have for recovery is short. Try asking yourself some important questions: Does the business meet a current unmet need? Do you have a compelling idea? How will you finance the venture, for example, will you need a loan, take on partners, or self-finance? It certainly doesn’t have to be overly complex. A client of mine felt that starting his own limousine service after decades spent working with a Fortune 500 company was something that augmented his income in a controlled, low-stress environment that suited his lifestyle and allowed him to interact with his clients’ one on one. His leased-to-own limo and his insurance payments were his main expenditures. SCORE, the Service Core of Retired Executives, is an excellent resource for this and is comprised of volunteers who offer guidance and advice in this area.
The concept of a “phased retirement” is one that challenges the all-or-nothing notion of work vs. total leisure that has characterized the debate until now. If you were to look at the most of the advertising of the financial services industry right now you would clearly see the latter idea- that of a silver haired couple strolling hand in end on an endless beach at sunset- has won out. However, the idea of phasing out of the work force can meet a lot of needs. For example, a client can either abruptly retire per the traditional model, or extend his career for an additional amount of time, say six years from 62 to 68. Those six years is then divided in such a way, for example, that the first two are spent at 75% of the working time and income, the next two at 50%, and so on. This has the benefit of keeping a critical income stream in the retirement plan scenario for additional years while also satisfying one’s needs to stay active and relevant. I see this all the time with small business owners and clients in academia. If you’re in the corporate world, however, it is especially important to consider if this option will even be available to you. Age discrimination and the growing class of cheaper, educated foreigners and younger workers may cause companies to turn away from seniors who think they can work as long as they need or want to. As a result, much of this work is being done as contract or consulting work without the benefits. And if its just benefits you need, perhaps a job at your local Home Depot might just see you through to your Medicaid eligibility.
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