It used to be that after you worked for 20, 30 or 40 years, you retired and collected
a nice pension from your employer. That’s the “old” retirement—and for most American workers, it’s history. (No, I haven’t forgotten the substantial minority of workers who are still entitled to pensions. I’ll address the lucky people in that boat later).

As a consequence, the traditional three-legged stool of retirement finance--consisting of Social Security, a private pension and the retiree’s savings--has had one leg taken out and is now getting pretty wobbly.

So it’s no wonder that to keep their post-retirement budgets from toppling, more people are doing what they planned to leave behind in retirement: work. (That’s the “new” retirement.)

But retiree-workers tend to be looking for more than a paycheck. They want the flexibility to work shorter hours or take longer vacations. And many want to do “meaningful” work that gives them a sense of purpose, rather than just punching a time clock.

Then there are the retirees who want to turn their hobby into a business. What could be a better time to let the entrepreneurial urge loose—and go whole-hog into the venture that you always dreamed about?

Well, the installment of “Get Your Finances Ready for Retirement” that airs on September 8th (due to news developments, this report has been postponed and will air on Monday, September 22nd) shows that new retirees may want to think twice before taking that step. Reporter Joe Collum found an ex-engineer in Upton, Massachusetts who tried to turn his love of woodworking into his second career. After investing $30,000+ of his retirement savings in new equipment, he found that sales fell short of expectations. Eventually, he had to seek a more conventional job. Collum’s conclusion: “If you’re starting a business in retirement, be sure to have a ‘plan B.’”

Now, getting back to the lucky “pensionaires” I mentioned earlier. As Connie Hicks will report on September 22nd, many of them have their own dilemma—deciding whether to take pension proceeds as a single “lump sum” payment or whether to take monthly payments (for the rest of the retiree’s life).

There are pluses and minuses to either course, and I won’t go into them now. But anyone who is confronted with this choice should be careful of brokers who urge the lump sum route. Many say they can invest the funds and do better than the return that the annuitized payment will provide. But again, this is something that the retiree needs to
consider carefully. Over the past year, stocks have gone down by double-digits. And while the market could rebound at any time, there’s no guarantee that will happen.

The bottom line: when it comes to retirement finances, always keep risk in mind.
And if you do decide to take a risk, be certain that you’re able to withstand the consequences if your best-laid plans turn into a worst-case scenario.