"Get Your Finances Ready for Retirement"-Second: Acts-Working In Retirement
Monday, September 22, 2008SUSIE GHARIB: Many Americans are rethinking their retirement plans given the recent sell-off in the stock market, and some are deciding to add a new element to their retirement: work. As we continue our series, "Get Your Finances Ready for Retirement," Joe Collum looks at the pluses and minuses of starting a new career in your golden years.
JOE COLLUM, NIGHTLY BUSINESS REPORT CORRESPONDENT: When Don Arthur was downsized from his job as a mechanical engineer in Massachusetts, he saw it not as a setback, but at age 56, a new door opening in his life. He had a nice severance package, no money problems, and his wife held a job with a good salary and benefits.
DON ARTHUR, RETIREE: So I looked at all that and said, you know, I'm going to try something different. I had been teaching myself wood-turning for several years, and I thought, I'm going to go try that. I'm going to be an artist, something totally different than engineering.
COLLUM: After consulting with financial planner Tony Proctor, Arthur spent $30,000 for equipment and set up a wood-turning shop in his basement. He then began working eight hours a day turning raw wood into fine bowls and artifacts and selling them on weekends at arts and craft shows. Don Arthur is among a growing legion of American Baby Boomers who have come to see their retirements not as a time to stop working, but as a chance to start a new career. Kerry Hannon of U.S. News & World Report says the economy is also driving many people to come out of retirement and get back into the workplace.
KERRY HANNON, RETIREMENT CORRESPONDENT, U.S. NEWS & WORLD REPORT: Without question there's a large segment out there that is finding, hey, you know, with inflation, with the way the economy is, I do need to get back to work. I can't just sit around and live off of my retirement funds quite yet.
COLLUM: Experts say the key to a second career is preparation. If you're starting a small business, you may have to study marketing, finance, and employment laws. You'll also need to know about start-up costs and how much income you can expect. And be prepared to pull the plug on the business to keep from spending money you'll need to live out your retirement years.
TONY PROCTOR, CFP, PROCTOR FINANCIAL INC.: There needs to be a reality check going in that says, here's the limits of what I'm willing to put up on the table here in this new venture.
COLLUM: For some working retirees, like Rook Younger, money is not the key. A lifelong baseball fan and season ticket holder, Younger went to work for the Arizona Diamondbacks as a tour guide at its stadium in Phoenix, Chase Field. Then his old employer, a computer company, asked him to come back to work in a higher-paying position. When he refused to give up his tour guide job, the firm agreed to let him do both.
JIM "ROOK" YOUNGER, RETIREE: That meant I had to have the flexibility with my consulting job to have time off here and there and work certain days and that has worked out really well for me.
COLLUM: There are possible drawbacks to second careers in retirement. If you go back to work in your early 60s after you've started to collect Social Security, your Social Security payments could be reduced. And if you work and collect Social Security at any age, there's another wrinkle: If your annual earnings total more than $25,000 or $32,000, depending on marital status, part of your Social Security benefits become taxable. But there could also be tax advantages, like the deductions Don Arthur took for the equipment he purchased. Despite that though, his venture as an artist has not worked out as he hoped.
ARTHUR: It has not met my expectations, revenue-wise, to be quite frank.
COLLUM: So Don Arthur changed course, going back to his former job and limiting his wood-turning business to weekends. The bottom line: If you decide to start a second career in retirement, be sure to have a backup plan. Joe Collum, NIGHTLY BUSINESS REPORT, Upton, Massachusetts.
