Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at VictoryLapRetirement.com). You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.
Young entrepreneurs seem to get all the attention, but there are also a lot of experienced Baby Boomers who are considering entrepreneurship for the next phase of their career or retirement plan. Are you one of them?
The first important point for you to recognize if you are considering this option is that past success in business or management, or even as a business owner, does not ensure you will succeed in a new business. You need to be smart and humble enough to seek support, advice and market feedback before you start.
I have worked with many entrepreneurs on new business start-ups. My advice is the same for any entrepreneur, young or old, experienced or not: Look before you leap.
Yes, that does mean you have to prepare a Business Plan, but remember, “It’s not about the plan, it’s about the process.” Preparing the document is much less important than the process of strategic analysis and testing the financial consequences for alternative business models and potential operating scenarios.
Interesting piece by financial TV guru Suze Orman about why she’s decided to quit her 13-year long TV gig. She sounds excited about moving on to whatever will happen after TV: clearly she’s ready for an equally exciting and influential encore career.
This week, MarketWatch zeroedin on 5 Disastrous Trends impacting future retirees. They are plunging savings rates, vanishing workplace pensions, lack of emergency savings, rising life expectancies [see the Hub’s Longevity & Aging section devoted to this theme] and over dependency on Social Security and Medicaid.
Well, perhaps retirement is overrated anyway? That’s the stance Lawrence Solomon takes in a piece this week at the Financial Post: Here’s a Retirement plan — Don’t! This is more or less what we’ve been arguing all along here at the Hub. I call it the JKW Retirement Plan: JKW stands for Just Keep Working.
However, as I’ve also argued, just because you never plan to retire, doesn’t mean you don’t need to seek Financial Independence. Findependence is always a desirable goal and the sooner the better. Retire by 40 asks the question How long will it take to achieve Financial Independence? It includes an interesting chart that reveals the hard reality: it all depends on your savings rate. If it’s low, it could take more than half a century to reach Findependence. If you could save 90% of your income it could take as little as three years. Note this observation:
The average retirement age in the U.S. is 62. That means most people have about 40 years to save and invest. If your saving rate is 5%, then you probably will not reach financial independence before retirement. Even 10% is iffy.
The Christian PF blog has an enthusiastic book review of a book that’s already a NYT bestseller: Living Well, Spending Less. The reviewer notes that while it’s not a “Christian” book per se, it’s packed with scriptural references but should resonate with anyone in this materialistic culture: it’s all about decluttering, being content with what you have, cutting your grocery bill in half and more. A bit like the phrase “guerrilla frugality” in Findependence Day!
North of the border, Boomer & Echo takes a look at how the financial advice business is going to be shaken up by a term that may make your eyes glaze over: CRM2. Sounds like inside baseball but read why Robb Engen says CRM2 will usher in A New Age of Enlightenment for Investors.
What’s The One Expense In Retirement That Most People Get The Least Satisfaction Out Of Spending?
Hint:
I love a warm fire on a cold, snowy day. But that same fire, if not properly contained, can do damage to anything in it’s way. Kind of like taxes.
Perhaps extreme to compare a roaring fire to taxes, but hear me out. Whatever goes into the fireplace (or to the government), you will never see (or spend) again.
Fortunately, much can be done with a little knowledge and planning. It’s useful to think of taxes as yet another, substantial retirement expense that needs to be managed.
Revisit/Understand Your Overall Financial Situation
At least 10 years before retirement, do some critical thinking about your finances.
Where will your retirement income and (cash flow) come from and when? What is the breakdown between “tax-paid” and “tax-deferred” money? Will your retirement cash flow be enough to meet your needs (or too much … a nice problem to have!)? How likely are you to receive an inheritance (or other money) that could push you into a higher tax bracket? Would it make sense to retire early and withdraw some funds sooner at a lower tax rate?
Here’s a piece I did recently for Money Magazine, entitled Let’s retire the word Retirement. For the convenience of one-stop shopping and archival purposes, I’ve also reproduced the piece below, with a few changes and links added since it was originally published in the current issue of the magazine.
By Jonathan Chevreau
This magazine, like its sister web site and its competitors, is devoted to the topic of money. That’s an obvious statement but stay with me.
We all need money to live, both in the present and the future. This basic fact has created the entire financial industry, dedicated to the notion of saving for a rainy day so we’ll have enough money both for today’s needs as well as tomorrow’s. And the week after, the year after that and so on, bringing us ultimately to the concept of Retirement.
Retirement is the greatest marketing bonanza ever conceived for the financial industry. If a mutual fund company, bank, insurance firm or ETF maker runs an ad, what is the major concept behind its marketing?
How Advertising portrays Retirement
Typically, it features a mature couple frolicking on a beach or golf course, care-free, active, smiling, still in love and doing nothing that resembles work.
I don’t know when work acquired such a bad reputation but I’d venture to say that in Canada, this phenomenon started to gather steam when London Life popularized its Freedom 55 campaign. Continue Reading…
I’ve been reading several books on Encore Careers, second acts and the like. A few weeks ago, we reviewed Marc Freedman’s The Big Shift. Over a one-week break in Florida, I read Freedman’s earlier book, Encore, subtitled Finding Work That Matters In the Second Half of Life.
All these books start with the premise that the baby boom generation may end up living a lot longer than they may have once imagined, which goes double for their own children and the generations coming after them.
Work that matters
If you believe that living to 100 is a distinct possibility rather than a one-in-a-thousand outlier event, then it follows that financial planning needs to take these extra years into account. Continue Reading…
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