The Paradox of Semi-Retirement

Oops, you’re not far away from retirement, you looked at your IRA balance… meager. So how are you going to pull it off?  Paradoxically, working just a little during your retirement, can be the answer to achieving all that you ultimately wished for in retirement: time freedom, travel, stress-free. Here are some basic principles for you to develop a strategy and a proper attitude.

The Halcyon Days are Gone

Since you were very young, you heard your parents talk about “retirement” and how great it was going to be. Your mom might have stayed at home to raise you kids, and kept the home. Your dad may have been a middle manager at a firm that offered a pension. And when your parents turned 65 years of age they probably did retire, the house was paid off, there was a pension and social security, and those weeks in Florida during winter…life was good.

Is that what you’re expecting, boomer? That same scenario? Forgetaboutit. Why? Well, there have been a couple of seismic shifts from our parents’ generation to ours, just to vamp on three:

  • The demise of pensions
  • The elimination of decent salaried middle management jobs
  • Longer life expectancies
Your parents enjoyed the halcyon days of family life just like Ozzie and Harriet, but those days are gone.

The Demise of Pensions

The burden of securing funding for retirement has shifted from companies that offered pensions to either IRA’s or 401(k)’s where the employee is now solely responsible.  It’s a sad fact, but most boomers simply haven’t saved enough in their personal retirement funds. Yes there will be social security but that won’t be nearly enough.

In your father’s era, large corporations offered pensions that were carefully managed by highly educated and highly trained financial managers who could invest properly to fund the disbursements.  Plus, the new young hires would finance the old retiring employees, and it worked great for a while. But it turned out to be a Ponzi scheme that wasn’t sustainable in the long run, and it’s thus it’s gone. Poof.

The Elimination of Middle Management a/k/a Downsizing

In the post-World War II era, the world was economically ravaged by war. Because the factories were bombed out over there and not on U.S. soil, we were able to jump start a powerful peace time economy. It was so powerful that families only needed one income and we could have that “Ozzie and Harriet” family lifestyle.

However, when the other economies finally recovered, the world flattened and it became globally competitive. Cars were made in Japan, IT jobs moved to India and a new management surgical procedure was implemented – downsizing.

Many boomers, perhaps yourself, faced job losses at a later stage in life. Most never got the salary they were accustomed to and had to tighten the belt. With no pension, they just weren’t making the deposits to their retirement accounts.

Longer Life Expectancy

The good news, and bad, is that if you’re still alive at age 51, statistically speaking, you could live another 30 years to the age of 81 and even beyond. That means if you retire at say age 66, you will have to self-finance about 20 years of living.

Contrarily, if your parents were born around the 1930’s their life expectancy, statistically speaking, was to age 60. So, you’ll statically have an extra 20 years of life over them, but where’s all that money going to come from?

There’ also another big gotcha, how are you going to exit this world? Will you be stricken down by a massive heart attack and be buried 3 days later? (Sad, but not an excessive financial burden.) Or, will you and/or your spouse be stricken with a stroke or Alzheimer’s and require expensive assisted living for years and years gobbling up all your finances?

It’s a sheer lottery as to when our last day on earth will be, and how expensive health care and assisted living will be those last weeks or months.

You’ll Need a Contingency Fund for End of Life

Nursing home stays can be very expensive, make sure you have a contingency fund.

This part is going to be really unpleasant, but better to realize it now rather than when the day comes.

According to US News, a semi-private room in a nursing home runs on average $222 daily, or more than $81,000 per year! And the average nursing home stay is 28 months. So, doing the math, if you’re average and require nursing home care you will need $185,000 per spouse, or $370,000 in reserve for this contingency alone. Will you have it? Or, pass the burden to your children?

Standard Retirement Income Streams

Keeping it simple, there are three standard income streams for retirees:

  • Pensions
  • Social Security
  • IRA Draw Downs

If you started your career in the public sector, congratulations, you probably have a pension to fall back on. The rest of you in the private sector enjoyed more income during our working days, but there’s no federal annuity coming. So, nothing coming in from the pension channel.

Thank FDR for our social security benefits. But can you really live on $1,400 per month? That’s what the average payout is to over 40 million recipients. Hopefully, yours is much more.

The 3rd factor and most variable is your IRA balance when you retire. Most middle-agers don’t have nearly enough. According to the Employee Benefit Research Institute, most Americans in the 55-59 age group average about $122,957 in their IRAs.

Sounds like a lot right? Wrong.

At age 55, if you’re socking away 10% of your $60,000 per year salary into your IRA, and maintaining a 5% compounded return, you will have about $295,000 in your IRA by age 66. If you start withdrawing 4% of your balance each year (the formula most financial advisors agree upon) that gives you slightly less than $12K per year. There goes your plans for a vagabonding through Europe.

Wait, what if you could add another income stream for that “fun” money in retirement?

Semi-retirement, the Magic Bullet

What if there was a way of adding another income stream without adding stress or minimizing your time freedom, or getting in the way of extended trips? There is, it called semi-retirement.

Imagine adding an income stream of up to $2,000 per month or $24,000 per year on top of your IRA draw down and social security, how much is that worth to you?

Well, if you do the math, at 5% yield and not touching the principal, you would comparably need $480,000 in savings to yield that amount. Amazing, more than you have currently saved up, right?

O.K., I hear you, “I’m tired of work, I don’t want a boss hovering over me, I want to fish more, I want to spend more time with my grandchildren, I don’t want to be hemmed in.”

I get it. So, let’s set some ground rules for the what we’ll need out of this semi-retirement job

It truly has to be “part-time”, 20 hours per week or less. The hiring firm has to realize that if they mess up they can’t expect you to work more than this amount.

Build in long vacation times and sabbatical. Your job can’t be so mission critical that you can’t take off for 6 weeks for a European trip if you wanted to.

Your ideal wage would be between $20 – $25 per hour so that you can achieve your goal of an extra $2,000 per month.

As for the stressful boss issue. Most companies are so grateful to get seasoned mature workers that they treat them like princes and princesses. And if they don’t, you walk.

Ideas Jobs for Part Time Work

O.K. where are you going to find that ideal semi-retired job?

You’re only limited by your own imagination, but let’s give you some fertile ground to explore:

Previous Employers

If you did good work for a previous company, the may be willing to discuss bringing you back in at a scaled down level – give it a shot.

If you were highly skilled in your field, you could hang your shingle out as a consultant, choose your clients and choose your hours.

Or, if you were a decent business person, you can hang your shingle out as a business coach. There are a plethora of young entrepreneurs that need mature business guidance.

Sales Reps

There are a host of products and services to be sold. Many companies are willing to offer commission only deals, but pick up expenses.  This could be selling via the phone in a business to business scenario. Or, merely generating appointments for field reps to follow up on. You can spend as much or little time as your wish.

If you’re a little more entrepreneurial, you can become a sub-agent in merchant services (credit card processing) or work under a realtor.

Until Amazon sells everything on the planet, there are many independently owned retailers just dying for reliable in-store sales associates.

Seasonal Work

With more and more retail sales occurring over the web, all those packages need to get delivered. That means seasonal hires but the big package delivery firms like UPS, FedEx and others. A good way to earn income in a few weeks and take the rest of the year off.

Start Your own Sales Business

Hundreds of thousands of people earn a living reselling stuff on eBay.  If you’re good at finding value at flea markets or peoples’ attics, this may be good for you. All you really need is a smartphone camera and the ability to write accurate descriptions of products.

If you’re good at design and making your own clothing, jewelry, etc. then Etsy may be for you.

Excess Capacity Opportunities

If you own a halfway decent car you can set your own hours and work for Uber of Lyft.

Similarly, if you have a decent apartment or home in area where people like to visit or vacation, and have another place to crash, you can rent your home on AirBnB, Home Away, and the like.

Education

Do you like to teach?  You can put your master’s degree to use and become an adjunct professor at a nearby college.  Or, how about a teacher’s aid in your local public school, a great way to get summers off.

Home Based Jobs

There are a number of home based businesses out there, such as pet sitting, you’re only limited by your imagination

If you already know how to build websites, web development is ideal for part time work out of your home.  You’ll have to get out and network to pick up customers.

There’s a growing field for virtual assistants that can work from home. This may be helping a self-employed entrepreneur to focus on the core of their business while you handle the mundane of staying on budget, answering email, booking appointments, handling phone calls and the like.

With the aging population there is high demand for at-home non-medical senior care. With the high expenses of resident assisted living, the more affordable solution is at-home senior care. If you’re a care giver and enjoy intermingling with seniors, this may be an opportunity for you.

Pets are prolific, another freelance opportunity is to be a dog walker, or pet sitter. Pet sitting usually involves overnight stays which doubles up as house sitting. Most pet owners don’t like to place their loved pets in the kennels, so pet sitting is a growing field.

Multi-Level Marketing

Multi-level marketing is portrayed as a pyramid, but it need not be. If you find a product that you truly love, whether it be Amway, Avon, health juices, go for it and sell the product to everyone you know. If you happen to build a sales force under you than you’ll make additional passive income.

This is only a partial list. With heightened awareness, you can create your own par time job or business.

It’s up to you

Remember, the quality of your (semi) retirement lies solely with you, there’s no one else to blame. Get started now.

 

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