Many baby boomers’ eagerness to retire isn’t so much about the work, especially the more enjoyable aspects of the work, but about the daily grind.
Setting the alarm clock five days a week. Commuting to the office. Attending meetings. Dealing with paperwork. Interacting with co-workers or customers.
What if retirement planning started with an exploration of how to make the job more enjoyable? This would allow pre-retirees to stay a few more years on the job, enjoy what they’re doing, and help forestall the brain drain that will eventually occur when retirees leave with their acquired knowledge and skills.
Aging scientist Ursula Staudinger is on a mission to maximize human resources that are dwindling around the globe due to declining birth rates. In Maximizing Our Aging Potential, she says that shortages in specific occupations are already becoming more prevalent in Western Europe and in some U.S. industries.
She adds that older workers are valuable to employers because of some of their patterns and habits of work, such as loyalty, reliability, promptness and strong interpersonal skills – not to mention that older workers often hold a business’ valuable networks and institutional knowledge. “In order to innovate and create sustainable societies, we need to understand whether and how we can maximize human potential in later life,” she says. How do we do it? By keeping work interesting.
That Last Stage Before Retirement
Those who are tired of the daily grind may see full retirement as their only way out, yet they may have mixed feelings about it: They like what they do, feel valued for the contribution they are making and certainly appreciate the paycheck. If only they didn’t have to deal with the downsides, such as commuting, meetings, paperwork and mundane projects, they’d be more willing to stay on the job.
Whether it’s working fewer hours or shifting into a more advisory role, most pre-retirees have some idea of how they can make their current jobs better.
You might have imagined your perfect retirement by thinking about where you’d live, and what you’d do with your time. But before going there, imagine the perfect job as a transition to retirement, say the five or so years before you call it quits for good.
We’re not talking about retiring and then finding a low-paying part-time job. Rather, we’re talking about working at the same high (or maybe slightly reduced) pay while downshifting in the same career in order to make use of that vast amount of experience and expertise you have accumulated.
How to Downshift
Business owners and self-employed people have an easier time downshifting than employees, because they are their own boss. In fact, these people are probably in no hurry to retire because they’ve already worked themselves into a situation that allows them to stay involved in the business.
If you work for an employer, it may be a challenge as you seek to downshift. A 2017 GAO report says that formal phased retirement programs are still relatively rare. Not only do employers see such programs as expensive and difficult to administer, they worry about potential liability related to age discrimination.
However, the report does cite benefits to employers who have instituted phased retirement programs, the main ones being the retention of knowledgeable, highly-skilled workers, and the transfer of knowledge to younger workers.
How to Create a Downshifting Proposal
Instead of waiting for your employer to institute a company-wide phased retirement program, you need to craft your own “downshifting proposal” that suggests ways the job can be altered to accommodate the needs of both the employer and the employee.
As with any proposal an employee might submit to an employer, start by emphasizing benefits to the employer. In exchange for more time off (or whatever it is you’re asking for), the employee promises to contribute their skills and experience for the betterment of the company and also help to transfer knowledge and skills to younger employees via training or mentorship.
By submitting a downshifting proposal, you’re saving the employer from bringing up the touchy issue of age, and it may also lead to a more workable plan.
And, of course, it behooves the downshifting employee to come up with the proposal because the manager may not know what it would take to keep the worker happy. Different hours? Different projects? Work from home? An employee who is familiar with both the employer’s needs and the role he or she has been fulfilling is in the best position to craft the downshifting proposal.
The Benefits of Working Longer
If you protest the idea of downshifting, are sick of work and wanting to retire completely, consider these numbers.
Can you really afford what might turn out to be a 30-year retirement? If so, great – that is the goal of retirement planning after all. If you fall into this category, you have a lot of flexibility. But that doesn’t mean you shouldn’t consider all of your options, downshifting included.
If your retirement is just marginally funded, consider how working just a few more years can make a big difference in your retirement security. A 2018 paper released by the National Bureau of Economic Research (NBER) found that a 66-year-old worker who works one year longer and claims Social Security one year later sees a 7.75% rise in their inflation-adjusted retirement income, 83% of which comes from the rise in Social Security benefits.
People who make the decision to wait to draw on their Social Security benefits until age 70, and decide to keep working – or downshifting – in their 60s, end up with more Social Security in the long run, a bigger base of retirement savings to draw from later. The NBER researchers observed that, for a 62-year-old, “working eight additional years will increase retirement income by at least 40%, and above 100% for some individuals.”
In Praise of Older Workers
The Center for Retirement Research at Boston College has taken a strong position advocating continued employment for older workers, mainly because longer life expectancies and insufficient savings require it. If any employers still need to be sold on the idea of retaining older workers, see “The Business Case for Older Workers,” which says in part:
Older workers today are healthier, better educated and more computer savvy than in the past and, in terms of these basic characteristics, look very much like younger workers. In addition, they bring more to the job in terms of skills, experience and professional contacts. Finally, they are more likely to remain with their employer longer, and longer tenure enhances productivity and increases profitability for the employer. All of these benefits more than offset any remaining cost differentials between older and younger workers.
If you have any questions or need support, you can schedule a complimentary consultation with our team of financial advisors.
Elaine Floyd, CFP, is Director of Recruitment and Life Planning for Horsesmouth, LLC.