Getting in Front of Changing Retirement Dynamics
by Roger Nusbaum AdvisorShares ETF Strategist
MarketWatch ran an article the other day that was another reminder of how under-saved the vast majority of Americans are for their retirements. Net-net these articles are a positive to the extent they promote awareness in a financial literacy context.
I would note though that the article was off in one respect in that savers/investors need to think in terms of covering expenses not multiples of salary saved. Someone making $200,000 but living a $100,000 lifestyle needs to think in terms of that $100,000 lifestyle, conversely the person who lives beyond their means also needs to save, or try anyway, toward that unfortunate reality especially if they cannot cut back for whatever reason.
For many years on the Random Roger blog we have looked at this from the standpoint of expenses and whether some will go down and the likelihood that some will go up. The idea of retirement being funded by just two income streams, Social Security and investment income (pensions or retirement savings) will not hold up for as many people as it did 20 or more years ago.
This will need to evolve as more and more retirees will need to add a third leg of the stool in the form of some sort of job. The context here is to seek to relieve some portion from the burden of an investment portfolio. Obviously if a financial plan calls for $4000/month from the portfolio but the investor/client can find some sort of part-time work that brings in $1000/month then the relief on the portfolio is meaningful and increases the opportunity for the portfolio to better tolerate the next big market downturn.
Too many people draw the conclusion that working part time in retirement must mean standing all day working for a retailer. People who put no thought into this may certainly end up being forced to take work that they would not want to do but it does not have to play out this way for anyone who prepares ahead of time.
Over the years I have referred to this as monetizing a hobby. People who have hobbies that they’ve put years into will have some idea of whether or not there is a way to generate an income from the thing they love doing and might have an idea about how to do it. Someone who is 55 years old might have five, ten or even 15 years to try to figure this out about their hobby.
Other outlets can include general interests as well. Are there National or State parks where you live? What about major league/minor league/big time college sports where you live? These things provide seasonal part time work. Volunteer work can also evolve into a part time (or more) paying gig.
As an example from my hobby/volunteer work of the potential depth to explore; I’ve been a volunteer firefighter since 2003. For the last two years I have been the fire chief of our department and an EMT.
In this little niche there are countless opportunities to provide training to small (and even medium sized) departments that might not be able to offer needed training inhouse. There are also opportunities as a trainer for very specific instruction at fire academies (things like hazmat and technical rescue). Incident management teams (the people who run emergencies) have many retirees as part of the team; tasks beyond the obvious include communications, finance, ordering supplies and the list is endless.
EMTs and paramedics also have opportunities to work in emergencies providing boots on the ground medical care/transportation. Some sports teams hire EMTs/paramedics to work at games (others contract with local ambulance companies).
There are opportunities in equipment sales; all firefighters love fire trucks and fire equipment and love talking about fire trucks and fire equipment. A new one to me is command level consulting where departments need temporary help in senior FD positions. While I was writing this post one of our firefighters emailed me a picture of the fire department from the Sprint Cup NASCAR race at Phoenix International Raceway; another part time opportunity for retired firefighters.
As a volunteer (in my case firefighting, in your case maybe something else) converting this activity into a paid opportunity will require a serious engagement in your chosen endeavor. People you meet in the context of doing your volunteer work become potential references for you or even the ones to actually offer you an income. This is something where people create their own opportunity. Further emersion into this sort of work can make the work itself more enjoyable as well as promote healthier aging for the extra intellectual effort required.
There is a huge relevance for financial advisors to this topic. The client who has accumulated $1 million likely never lived a $40,000 lifestyle and the math behind portfolio sustainability will come as a shock to some segment of your client base.
Offering them the potential solution of getting paid to do something they love and have been doing for free will make some of these difficult conversations go a little easier.