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Are you ready for a “second act” in retirement? Unfortunately, many Americans heading toward 60 aren’t—at least financially.
While the median 2019 retirement savings for Americans ages 55-64 was $408,000 according to the Federal Reserve Survey of Consumer Finances, the median savings for this group was just $134,000.
Combined with these savings and Social Security benefits, more than half of Americans in this pre-retirement age group will likely see a significant decline in their standard of living when they retire. Though they yearn to quit a job and pursue a passion — a “second act” — their financial situation will make it difficult.
At the same time, there are millions of Americans nearing retirement age who are more financially secure and can consider using the tightest job market in a generation to transform their lives.
“This environment may be the best we’ve seen for people in their 50s who want to do their next thing,” said certified financial planner Sheryl Garrett, a former financial advisor and founder of the Garrett Planning Network. “I see a lot of possibilities for second acts – maybe third and fourth acts too.”
Garrett doesn’t believe in retirement, arguing that it’s not a natural state for humans. She prefers to view later life as an opportunity for “repair”. It may mean finding work that’s easy on your body, but perhaps more importantly, nurturing an interest or passion.
“Preparing for retirement is about more than just being financially prepared,” Garrett said. “It’s about psychological and social readiness.
“We need a second act,” she added. “We may need it from a financial point of view, but over time I think the psychological aspect is more important.”
Garrett made some changes himself. She no longer advises individual clients, but still works with consultants in the Garrett Planning Network. She also manages a four-cabin resort in Arkansas, where she lives.
“I outsource maintenance, but I reap the benefits of meeting guests and they pay for our expenses,” she said. “I’ve also become a gardening fanatic.”
The key to figuring out your second act, according to Garrett, is to start with a realistic self-assessment that answers several key questions:
• What is your passion? Second acts call for some passion. If you’re not motivated to pursue a new job or activity, there’s no point.
“You may need money to get out of it, but you have to be driven by passion to keep it satisfying,” Garrett said.
She said she saw older friends become librarians and financial advisers. Some have started their own businesses. Others have taken on new jobs because they miss human interaction in the workplace.
“The stereotype that older people work at Walmart is often not about money, it’s about socializing,” Garrett said. “Maybe they need the money too, but they’re happy to be greeters.”
If your passions align with golf, gardening, or reading, you might be better off staying at your current job and working part-time if possible.
• How important is the money? Depending on your financial circumstances, a second act may still need to provide you with significant income to be meaningful – you will effectively “not retire”.
Additionally, pursuing a passion can be expensive and you need to be realistic about the financial risk involved.
“I once had a hospital administrator who wanted to open a bait and tackle shop in his mid-50s,” Garrett said. “His wife thought it was idiotic.
“We did some analysis and I advised them that they need a few more years of income before he should seriously consider it.”
• What are your skills and what are the opportunities in your community? Does your passion require education or additional training to pursue it effectively? If so, do you have the financial means to afford it? Equally important is making sure there is a market for the interests or business you wish to pursue.
“If you’re in the community you want to be in, find out what challenges people have and if you can help provide solutions to them,” Garrett suggested. “Whatever it is, there are needs and opportunities out there.
“Get back to your own passions and make your next chapter the way you want it.”