Ever wished you could do things over? Go back and study harder at school? Or pursue your dream career rather than settle for a steady pay cheque? Maybe you wanted to work overseas but didn’t get the chance. While no-one gets a Benjamin Button-style rewind option, the days of lamenting how you “missed the boat” could be over.
A structural change in how we “do” life is well under way, affecting how people approach their retirement years and how younger generations plan for them. It’s common knowledge that life expectancy is increasing, and the financial advice industry tends to home in on the longevity risks that presents, whether that be the dangers of outliving your savings or the inability to pay for medical care. But what if the key to a happy and fulfilling retirement was to embrace these extra years by having an encore career that keeps some money rolling in, while also giving you the chance to follow your passions or engage more with some of your favourite pastimes? Could it be that by effectively managing the longevity risk, you give yourself a longevity opportunity?
In this three-part series, we’ll look at the concept of an encore career, explain what it is, how it can enhance your later years, and examine the financial benefits. In this blog, part 1, we explain why this trend is here to stay.
In 1970, Canadians had an average life expectancy of 70.7 but 40 years on that had risen to 81.7. Medical science keeps improving and humans, generally, continue to get more knowledgeable about healthier lifestyles and diet. Take David Sinclair, a Harvard biologist and anti-aging researcher who has spent years immersed in longevity science and who says he has slowed his biological clock down by a decade. What’s striking about many of Sinclair’s anti-aging recommendations is how mainstream they now are. Eat well, exercise, and “surround yourself with people who are not jerks” are rules most of us at least try to live by. The conclusion: it’s attainable.
Given that people are living longer, it’s obvious that retirement savings need to stretch further and be able to handle the burden of additional health and wellbeing costs. The 2008/09 recession and global financial crisis, combined with the decline in pension coverage and a shift from defined‑benefit to defined‑contribution plans in the 1990s and 2000s, compounded this trend. As a result, the financial risk has now largely been transferred from employers to employees.
Also, the typical professional career has changed. Gone are the days when an employee would stay with one company for 30 or 40 years. According to career experts Zippia, the average person now switches jobs 12 times in their lifetime. It’s harder, therefore, to build up a suitable pension pot than it was. The financial plan that had your money lasting until you were 90 may have to be revised. Spoiler alert: there’s a good chance you’re hitting three figures!
But what does this new reality mean? Firstly, and obviously, people must work longer. According to Statistics Canada, more than 53 percent of men aged 65 or older and 38.8 percent of women of the same age were still working in some way in 2015. This is the highest proportion recorded since the 1981 Census. The number of seniors working also doubled between 1995 and 2015, with most of the increase coming from part‑year or part‑time work.
Is an encore career for you?
Even if you are not doing yoga every day or drinking copious amounts of anti-inflammatory green tea, the general understanding of what makes our biological clock tick slower has grown. It’s no surprise, therefore, that 40 really is the new 30 and, by the same logic, 60 is the new 50, or even 40. The impact is borne out in life milestones – people are waiting longer to settle down, are becoming older parents, and retiring later.
An element of this is, of course, lack of choice; if we’re living longer and want to maintain a certain standard of living, we must work more and save more. This instinctively sounds bad, right? Slaving away longer for less security in our twilight years … but is it? Your Grandpa likely stayed with one employer and saved enough to retire at 65 to live another 10 or 15 years, if he was lucky. Now, we arguably get to have more varied careers and live longer, and working past the traditional retirement age is far from a negative. In fact, for a lot of people, it’s the key to a vibrant, stimulating later life as a wise, albeit wizened, elder statesperson.
An “encore career” can go by other names – semi-retirement or even “victory lap” – but for those who have a retirement plan and want to top up their bank account, it might be ideal. There are also important, non-financial reasons to keep on working.
An encore career might also mean you pursue a passion you haven’t previously been able to because your first career was too time-consuming and lucrative. Maybe this time you monetize a hobby, or maybe you opt for a social job like barista to get your fix of human interaction. The point is, you can do whatever makes you happy and generate some income at the same time. This not only fulfils you on a personal level but also means you don’t have to scrimp and save during retirement. Knowing this in your 30s or 40s could also alleviate the perceived pressure of having to save every penny possible to ensure you don’t outlive your money or cut back on life-enriching travel.
The bottom line is partly financial, of course, but arguably taps more into well-being and a change of thinking. Sixty-five is no longer shorthand for bingo and aimless hours in the corner chair watching daytime TV. Instead, “retirement” presents us all with a longevity opportunity to fulfil our passions and chase our dreams, or just simply find a fun and engaging new environment to spend a few hours a week with something to do. Have you ever wanted to be on a professional movie set, up close to some stars? You know they actually pay people (and feed them) to hang out on set and be extras in the movie?
With prudent financial advice and money management, an encore career might be the catalyst for the best years of your life.