By Robert Morrison, CFP
In my work as a financial planner, solving for retirement in an era increasingly void of company pensions usually orients me on helping clients amass enough savings/assets to support their lifestyle for at least 30 years. Today, this generally requires a healthy six-or seven-digit portfolio. While having more assets is always a good thing, planning to fund a third or more of your life almost entirely from savings and investments makes it too easy and common to delay retirement by two, three, or even five years. Though there are benefits to postponing retirement, sometimes the decision can come with a hefty price tag.
We've all been touched in some way by a story of a family member or friend who retired after a long, hard career with big plans only to see them get interrupted by a healthcare issue, early death, or the need to care for an ailing spouse. This unfolding discussion has caused me to think of all of the people I have known who didn't get the long retirement that they had hoped for.
What if they would have started five years sooner? What would that have meant to them and their families?
An Emerging Path to Retirement
Over the past several years, I've noticed a distinct shift in how some of my clients think about retirement. Conversations that used to focus on investment performance and withdrawal rates now center on the most precious commodity that we have, which is time. I was often asked, "How soon can I retire?" But as I thought more deeply about the question, what they really wanted to know was, "When will I be able to do what I want to do?"
If we start to build more of a glide path to retirement, can we begin to get some flexibility, freedom and enjoyment five years sooner? I believe so.
What Is a Victory Lap?
More people between the ages of 55 and 65 are blurring the lines of what used to be well-defined chapters of work and retirement by starting a transitional career. I like to think of it as a victory lap. The reasons to consider a victory lap are too numerous to cover in detail, but suffice it to say the potential for a better work-life balance and all of the benefits that follow is the driving factor for most people. It's about creating a more flexible bridge from the "rat race" to the golden years. There are many ways that people go about it, but from my observation, the process includes several common elements.
Plan Your Victory Lap Three to Five Years Out
I can't emphasize enough the importance of giving yourself three to five years of advance planning and allocating most of the time to finding out what kind of work you'd like to do. If you wait until your present company offers you a severance package, you won't have enough time to complete all of the steps. Investing this time will pay off in the long run and will likely give you five years or more to live the life that puts your priorities first.
Getting Your Financial House in Order
You can't do anything until you know where you stand financially. It's critical to understand your current readiness for an interruption, reduction, or possible elimination of your income. Update (or build) your financial plan and run some scenarios to find out how much income you'll need to re-create for yourself and for how long.
Most people embarking on a victory lap assume that their income will go down (although that's not always the case). You’ll want to understand the impact of reduced/eliminated savings and how long you'll need to keep working. This exercise will help you weigh the requirements and longer term ramifications to determine how viable a longer-term victory lap is for you. More importantly, it should inform the options that you'll have in selecting what type of work that you’ll do, and how aggressively you'll need to pursue it.
Some clients get stuck in this phase, because they have been in their current career so long that they've given little thought to a potential departure. Consider starting small by talking to others inside and out of your industry. Be sure to weigh several options--consulting, teaching, contract work, etc.
Assessing Your Readiness
Once you're clear on what you want to do, start figuring out how to get from A to B. What will your business plan look like? Do you need any specific credentials or additional education? You may also need to figure out some basics, such as: Do you need to rent a separate work space or need any equipment? How will you manage the business (invoicing, etc.)? Are you equipped with the skills and contacts to be active in this business right now?
Assembling Your Team
Building a strong team to support you is critical to your success through this transition and beyond. Ask for all kinds of help and do your homework by surveying the experience of others. Do you have a coach or mentor who has blazed this path before you? Will you partner (formally or informally) with others?
The Test Drive
Taking your idea or plan to market to see if it has traction is key. If permissible, this is where you can do some side work before leaving your employer to try it out. It's also where you determine the viability of your plan. Will it really work? Maybe friends or colleagues have said they'll hire you for consulting or contract work. Can you get your first client signed? If teaching is your thing, try teaching a night class at a community college. If possible, do the test drive before leaving the (perceived) security of your current job.
Shifting Lanes and Making The Move
Once you've proven the concept and potentially gotten an anchor client, it's time to map out your transition timeline and make the move. If you've been at the same job/organization for some time, the transition can take months or longer. All the while, you're continuing to get things ready, get the word out, and prepare yourself to make the move.
I have seen the value for those making the shift--years of more rewarding work and more balance in the work/life spectrum, plus a better financial outcome for many. In my experience, the intangible benefits of more time with your family and the sense of achievement from dedicating yourself to meaningful work make embarking on a victory lap career worth the effort.