Thursday, July 31, 2008

Working longer: A solution for more people in the future

A major premise of is that it makes sense to stay active after “retirement.” There are many reasons – physical and mental health, economics, and preventing the waste of experience and knowledge, among others.

In fact, we believe that “retirement” in the conventional sense – withdrawing to a passive, unengaged existence – is a bad thing.

One of the reasons for continuing to work described on is the need or desire to continue to make money – other than Social Security or a pension.

Now along comes a book whose main message is that many people will have to work longer than they thought they would, just to maintain their standard of living.

The book is Working Longer: The Solution to the Retirement Income Challenge, by Alicia H. Munnell and Steven A Sass (Brookings Institution Press.)

The book was reviewed recently by Harry Hurt III in the New York Times. Munnell and Sass “note that the nation’s retirement system, as embodied by Social Security and Medicare in the public sector and I.R.A.’s and 401(k) plans in the private sector, is contracting in its ability to replace workers’ lost income – even as life expectancy is increasing,” Hurt writes.

I think this book is most likely to be a very important contribution to the conversation about retiring/not retiring, encore careers, reinvention and rebooting. I plan to say more about it in future blogs.

“About 19 percent of men and 33 percent of women who survive to age 65 will live to age 90 or older and have to support themselves for almost 30 years,” Munnell and Sass write. “The arithmetic does not work.”

The authors cite numerous studies that turn up these very inconvenient truths:

• For people who retire at 65 today, it is estimated that Social Security will only provide the equivalent of 39 percent of their incomes after deductions for basic Medicare contributions.
• Those who plan to retire in 2030 can expect net benefits of only 30 percent of their incomes.
• In 1989, 66 percent of American employers provided post-retirement health care benefit programs. By 2006 that number had fallen to 35 percent.
• Americans do not save enough. In a 2004 Federal Reserve study, the theoretically possible or simulated amount of money owned by people aged 55 to 64 was $314,000. However, the actual average savings was only $60,000.

Munnell and Sass recommend that people postpone their retirements from the current average age of 63 to age 66. Four more years of work changes the ratio of retirement to working years from 1 to 2, meaning 20 years of retirement and 40 years of work, to almost 1 to 3, or 16 years of retirement and 44 years of work.

Working longer, the authors say, would delay the need for people to tap into their I.R.A.’s and 401(k)’s, increasing their total assets and the future income they can produce. It would also maximize the benefits of Social Security, which are about one-third higher for recipients who are 66 than for those who are 62.

The authors raise other important issues, which we will discuss in subsequent blogs: whether older workers will be healthy enough to continue to work, whether they will want to, and whether employers will be willing to employ them.

If you’re interested in ordering the book, please click here
click here. The link will take you to the resources section of, and Working Longer is the first book listed.

Sunday, July 6, 2008

Early Retirees in New Ventures, Mostly for Fun

A recent article in the New York Times described a new breed of entrepreneur rebooters now coming on the business scene.

“Not the hard-driving type who makes the business news pages,” the Times reported in an article by Brent Bowers. “Rather, the laid-back, come-what-may variety. Many of them are part of the first wave of America’s 76 million baby boomers who are taking early retirement and turning their hobbies into small businesses. Very small businesses.”

The Times said the new entrepreneurs see their microbusinesses as a way to give focus to a favorite pastime, get more zest out of life and make a little money. The best part is they do not care if the ventures fail.

Ty Freyvogel, a small-business consultant and investor in Pittsburgh, predicts that the ranks of early retirement dabblers will swell as they discover they have too much time and not quite enough money. “If they do the proper research and can get started without putting a significant amount of capital behind them initially, these types of small start-ups can get going with little risk,” he said.

Three of these entrepreneurial rebooters were described in Bowers’ article.

Carl Boast, owner of Peaceable Kingdom Photos in Moneta, Va., quit his job as a neuroscientist in the pharmaceutical industry five years ago at age 55 and became a nature photographer.

He says he is too busy hiking, boating, reading, writing songs and traveling to fit the definition of an entrepreneur. “I’ve put very little effort into marketing,” he said. “I’m not out to make money or change the world.” He has created a Web site, he says, but it is “buried in Earthlink somewhere” and is out of date.

He makes a few hundred dollars a year, but it's not about the money. What really motivates him, he said, is “sharing my pictures to convey the idea, ‘Wasn’t this a neat moment?’”

Jan Oudemool of Harwich, Mass., 65, retired five years ago from a job as a special-education teacher and not long after began making decorative mobiles in his home.

Last year, he sold about 35 for close to $4,000, more than double the revenue of the previous year, his first in business. He’s pleased with the growth – not so much for the money as for getting his creations out of his house so they won’t clutter up his basement.

He has a Web site, business cards and a niche market. But he says he knows next to nothing about business, did no research or planning for his company and does not want it to grow.

Bowers, the author of the article, has also recently started a business. Formerly a New York Times editor, he took early retirement two years ago and opened a business writing freelance articles and giving occasional speeches.

“I do not know a whole lot more about the mechanics of running a business than Mr. Boast or Mr. Oudemool,” wrote Bowers. “But I guess I’m a quasi-entrepreneur like them. I’m doing this for the fun, not the money. I love being (mostly) my own boss and I am even tempted by the delusion that I may make it big some day.”