Saturday, July 17, 2010

Your Second Career - Plan on it!

Many, if not Most people don't retire from the career they started in. 30 years of service and a gold watch is out. Being booted when you're 50 is in. So expect to have a second career and start planning now for this contingency!

I have discussed before how for many people, retirement is not something they plan, but something that is thrust upon them, often years sooner than they expected. My Father got the boot at age 55 and never worked again, except as a financial consultant on commission for a few years.

Lately, I have been seeing this happen to many of my friends and acquaintances. And it seems to be a popular trend. To some extent, this is a new thing, as companies cut costs by firing older employees. The old days, where you worked for 30 years in the mines and then got a gold watch are out. Today, they boot you after 15 years, and you may end up seeking employment in other sectors - making far less than before.

Unfair? Perhaps. Perhaps expecting someone else to hand you a "job" for life is a bit unfair, too. After all, no one is "entitled" to a job - you have to work for it. But regardless of the social justice issues, if you are out on the street a decade before retirement, you will have to find something to do with yourself. Whining about the unfairness of it all is not a realistic answer.

The following are some real-world examples of the "second career" phenomenon that occurs. For many, this is a painful transition, as we shall see. Even for those who made the adjustment, it was not an easy process, but one that required a re-evaluation of lifestyle values. But for most, it has ended up being a liberating experience, to some extent, as they now see life in a new light.

1. Joe worked as a Real Estate lawyer for a private, family-run company. He handled all the legal aspects of their small Real Estate empire for two decades. But the family decided to get out of the business as the market peaked. They liquidated their holdings and decided to spend the rest of their lives spending it all. Suddenly, they had no need for Joe. At age 55, he is unemployed.

Joe socked away a lot of money over the years, and is very thrifty. He moved to a less expensive city to live, and is enjoying being quasi-retired for the time being. He has enough saved to never work again. He is thinking about perhaps doing contract work or being "of counsel" to a law firm. After 20 years with one company, however, his options are limited, and with the collapse of the Real Estate business, his skills are no longer in high demand. Setting up a Real Estate practice from scratch could be risky, and he could end up losing all his life savings.

Joe did a lot of things right here. He saved money so he would be in a good position if forced into early retirement. His expectations for employment are realistic at this stage in his life - having never worked at a law firm, he knows they are not likely to hire him as an Associate or Partner. The only thing he might have done better was to foresee his inevitable downsizing and take more proactive measures.

But hey, when you have as much dough in the bank as Joe, you don't have to worry, right?

2. Sarah and Bill were independent contractors. They had a steady stream of government contracts when they were in their 30's and 40's. But as they got older, the demands for their services dried up. Newer, younger people were competing with them for business - and getting it. After a couple of years with no work, they decided it was time for "Plan B". They both got jobs at a local winery. They are making far less than they used to, but the money pays their bills, which means they can leave their considerable retirement savings alone.

Again, Sarah and Bill did a lot right here. They squirreled away a sizable chunk of money during their working years, so if they had to, they could stop working altogether (we all have to do that sometime). And they swallowed their pride and took jobs that paid a lot less than what they were used to making. But they are having fun and enjoying life, rather than sitting and moping around. And they managed to get a contract or two in the meantime.

What has been hard for them is to downsize their lifestyle. Cutting monthly expenditures is a lot harder than increasing them. When the money dries up, many people have a hard time giving up on the status things they are used to having - expensive cars, the $10 designer cup of coffee, and things like that.

3. Fred and Frank ran their own business in the big city. After many years of hard work, they decided that the stress was too much and the competition too great. Rather than "ride it all the way down" they sold their business and made a nice profit, and moved to the country. Since they were too young to retire, this meant they had to find jobs, particularly to cover health insurance.

Today, they are both working, but making far less than they used to as self-employed businessmen. But they are happier, though. Less stress and less fuss. They socked away some money and are living comfortably off their reduced incomes, so they don't have to tap into their savings. Plus, they have health insurance - a big plus for folks during those "awkward years" from age 50-65.

4. Ralph worked as an Accountant for a big national firm. He was there for 20 years and made very good money. Then the market tanked, and he found himself out on the street. He applied for jobs like the one he had - with a corner office and a six-figure salary. But with all the unemployed accountants out there, he found the pickings pretty slim.

He refused to consider any related jobs - doing temp accounting work, bookkeeping for small businesses, setting up a tax consulting business, or the like. He always worked at a big company making big money, and that was what he was entitled to. But those jobs are gone for good. And when they do appear, they are given to younger accountants who will work for less money.

Depressed, he sits around the house, watching television and not bathing. It is pretty sad.

Ralph did a lot wrong here - including not saving money for the inevitable. He assumed that he would work at his job until age 65 and then retire. He assumed wrongly. And if he bothered to look at the actual careers of his fellow employees, particularly those senior to him, he would have understood that the odds of him being made Partner in the accounting firm were slim.

It is hard to give up on dreams like that, but you have to move on. Ralph needs to realize that those glory days are behind him - but that many more enjoyable days lay ahead. He needs to get off the sofa and back to work, even if it is just temp bookkeeping work at some small company using Quickbooks. Work is work, and even a few dollars an hour is better than the nothing you make sitting on the couch.

5. Sam was in the military for 20 years and then retired. Having been taken care of from sunrise to sunset for most of his adult life, it was hard to transition to "civilian life". But Sam is a hard worker and almost immediately got a job - any job, just to keep busy. He has enough socked away in retirement, plus his military pension.

But he works part time in retail to make some extra cash. Maybe he wants to buy a newer car, or perhaps take a vacation. Rather than tap into his savings, he works part time to pay for these things. And employers are happy to have someone who is mature and shows up on time. For them, Sam is a godsend, and they are more than willing to work around his schedule to keep him on board.

Sam, like the other characters above, is an composite of a number of folks I know. For people in the military, early retirement is pretty much a given, as after 20-30 years, you are out, unless you have a career path in the Pentagon (and even then, they boot you at age 65). Most folks I know who are former military have planned for the inevitable as a result, and usually start a second career after leaving the service.

6. Arnold worked for a large company that was downsizing. They offered him an "early out" if he would retire, and hand him a cash bonus for doing so. Arnold invested this money in some pretty dubious business schemes and lost a lot of it in the process. Since he was highly paid in his last job, he refused to take any other jobs he considered "beneath him." He never worked again.

While it is tempting to take an "early out" offer from your employer (and in many cases, it is a sign of the writing on the wall, so take it!) you should consider carefully how to invest any early out bonus or other money. Retirement is no time to be starting a business with your life's savings. That sort of thing is for young people, with lots of time, energy, and nothing to lose.

As we age, risk should not be part of our portfolio, and starting a business is about the riskiest thing you can do. You may succeed, but the odds are stacked against you. And if you lose it all, well, you can't just go back to work and earn it all back - you'll run out the clock first!

Invest retirement savings carefully and avoid tapping into them. Take a second job or start a small business that doesn't require a lot of capital up-front (the best and most successful businesses do not require huge investments up front anyway). Doubling down your bet with your retirement savings is probably not a good idea, however.

7. Gerald and Jane worked for many years, he in the legal business and she in retail.  They spent their money carefully, avoiding things like luxury cars, fancy houses or apartments, and expensive clothes.  They took nice vacations, however, and lived well.  After many years of hard work, they decided to take an early retirement.  Their investments had done well in the Stock market and it looked like they could live off these for the rest of their lives.

At first, it went well, but then the market took a turn for the worse.  Suddenly, it no longer looked like an early retirement was such a good idea.  Rather than whine about the unfairness of it all, Gerald found some temporary contract work that paid fairly well, while still allowing him to live a fairly unstructured life.  With a little extra income, early "retirement" - at least part-time, is possible.

They did the smart thing by socking money away and not spending money on foolish status items.  However, perhaps in retrospect, retiring early based on the euphoric market returns of the last decade was premature.  But both are hard workers and have money set aside, and thus will do well, regardless.

8. Tim had a cushy government job as a safety inspector.  It was a good fit for him, as he was virtually unemployable in the private sector.  Tim enjoyed smoking pot - a lot - and was constantly getting into trouble with bosses at work (the whole "problem with authority figures" thing).  He ended up getting shunted off to a job where he would annoy the least number of people, and it seemed like his future was fairly secure.

Then the recession hit and many State governments found themselves scrambling for money.  Laying off government employees, once considered to be unthinkable (or impossible) became a reality.  And Tim's bosses were all-too-happy to put him at the top of the layoff list.

No job is indispensable or "firing proof" - even in government, academia, or the military these days.  You may think "they can never fire me!" but they can, if you give them enough motivation.  Even in the government, if you make yourself a target, management will go to the extra effort.

Tim still hasn't come to grips with reality yet (the pot helps) and thinks the job market will "turn around" and he will find employment when that happens.  What he doesn't realize is that high-paying jobs are just not out there in the private sector, particularly for 55-year-olds who have been let go from the government.  Even lower paying jobs will be hard to find for someone with only academic skills and a pot-induced aversion to working with people.

* * * * * *

The list goes on and on. Early out is the norm these days, not the exception. I know dozens of people who took "early out" or were forced out, long before they wanted to retire. And in many cases, it was a stressful time for them. Assuming that their last salary was what they were "entitled to", they refused to take any subsequent job that paid less. And they refused to cut back on spending and lifestyle, in many cases, until it was too late.

What can you do to plan for an inevitable second career? And if you are given the axe, how can you transition into this second career? Let's take these one at a time.

First, stop spending money like a drunken sailor. The one thing every second career person says to me is that they wished they had saved more when they were making a hundred grand a year. They assumed the big paychecks would continue ad infinitium, so they went out and bought a fancy house, fancy cars, and spend money on booze, restaurants, expensive vacations - you name it.

Then the shit hit the fan, many were alarmed to discover that they had little in the way of accessible savings, and that retirement was nearly a decade away.

So sock away money while you can, if you can, if you have a good-paying job. Don't Assume your cushy job will go on forever - because it likely won't. Conditions change in our economy very rapidly these days. What was once a viable business model is bankrupt in a matter of years, not decades. So a "steady" job with Acme Widget company is no longer a guarantee of anything. Widgets will be obsolete in 5 years, if they aren't already.

Second, keep your ear to the ground at work. Many people claim to be "blindsided" by layoffs or firings. But if you pay attention to the company's bottom line and profit and loss statement, you will know months or years in advance that things are going to go sour. I wrote on this subject before as well. You also should have a good idea about your own job performance and whether or not you are a cost-effective asset to the company. If your work seems too easy and you are highly paid, you are one recession from a layoff. If your boss hates you, or a competing boss wants to take over your department, you should think about these things and take action.

Sometimes this may mean looking for a new job before you are laid off. Other times it may mean socking away your money and thinking about the second career ahead of time.

So what happens if you get the axe and now are out on the street in the worst recession since 1979? Well, relax, it ain't as bad as you think it is. I got a job in 1979. People were hiring back then - and they are today. They just aren't paying a hundred grand for a "human resources manager". You may have to hump a little harder and make a lot less. But life goes on and is worthwhile living. In fact, you may find yourself happier and having more fun than ever before.

First, chuck foolish pride. You'd be surprised how many people get depressed or even kill themselves because they have to sell the mini-mansion and the Mercedes. They spent a decade rubbing their success in everyone else's nose (so they think, no one really notices anymore) and now they have to eat humble pie.

Big deal. So you have to live in a smaller house and drive a Corolla. Welcome to the real world. All that fancy nonsense was just crappy overpriced junk, anyway. You can live well and live on a budget. But that means pride has to go - and that means selling off a lot of crap and not drinking $10 coffees and using restaurants as a kitchen.

You may find this a healthier lifestyle as well. Eating less and working more is a good antidote for the sedentary office lifestyle.

Second, realistically evaluate your options. The big-ticket job might come back - or it might not. But it doesn't hurt to find another job in the interim just to keep busy and put a little money in the bank. Why wait until you are dead broke and tapping into your 401(k) to break down and do what you should have done all along.

Figure out where your skill sets apply and then find jobs in related fields where you could fit in. You might not make nearly as much as before - but it beats sitting around doing nothing.

If this means a temp job, so be it. These can lead to permanent employment. But don't think of any work as "beneath you". Foolish pride, remember? There is honor and dignity in all work, but no honor or dignity in being unemployed out of spite.

I've worked all sorts of menial jobs in my life, from washing dishes, to cleaning restrooms. I was a Teamster once. I delivered pizzas. I tutored calculus. I was even a sex educator. And if the situation should arise where I have to, I'll go back to jobs like that - or others - if it means putting food on the table until I can retire.

The second career is something that you are more than likely to encounter in our new economy. Plan for it, prepare for it. Maybe you'll be one of the lucky few who works at the same job for your whole life, crowing your career achievement by rising to VP of sales and retiring with a fat pension. But today, this rarely happens anymore. Companies are finding it far cheaper to lay someone like that off and hire two younger people in their place. Fresher ideas, more work, and lower price make the choice pretty inevitable.

And the choice is yours. You can sit around and mope all day and whine about how unfair it all is, or you can swallow foolish pride and move on. And from the examples I have given above (which are composites of dozens of people I know), those who move on often find themselves enjoying life even more than when they were chasing false dreams at the "dream job".

And that's what life should be about - enjoyment, not status-seeking.