We like to think that we can carefully plan out when we'll retire and how we'll spend those carefree days. But too often, carefully planned retirements are derailed when people find themselves pushed out of the workforce. Steve Wolf and Mary Murley, a married couple with 11-year-old twin sons, are watching their retirement dreams recede farther into the future. Roughly 40 percent of their life savings has evaporated in the stock market in the past year. To make matters worse, Wolf, 55, was laid off from his engineering job in February, and now the family's sole source of income is Murley's part-time job as a classroom aide. Wolf isn't limiting his job search to their hometown, Grand Rapids, Mich., so the couple put their house up for sale—priced below what they paid for it seven years ago. But so far, there have been no bids on the house or job offers for Wolf. "I was hoping that we would be able to sell our house and make up the loss by purchasing someone else's foreclosure," says Murley, 53. "But if we sell the house tomorrow, we'll probably end up living with my mother in Ohio." Here's how to cope with an unplanned retirement.
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Prepare for emergencies. The majority of Americans suffer some kind of financial shock during their working life, which could easily dismember their retirement plans. Many adults between ages 40 and 79 have endured job loss (18 percent), divorce (29 percent), the death of a spouse or life partner (10 percent), a serious illness or long-term disability (24 percent), or the illness or disability of a child (7 percent), according to a recent AARP Financial and Boston Research Group survey. Only 43 percent of those surveyed made it to middle age or older without some sort of financial emergency. Plus, about 47 percent of current retirees say they left their jobs sooner than they had planned, according to an Employee Benefit Research Institute survey. Building up an emergency fund is essential to surviving each of these problems. Baby boomers need a plan for health insurance coverage until Medicare eligibility kicks in at age 65 and life insurance to help support dependents. They should also look into disability payments in case they become unable to work.
Job-hunt before you need a job. Once older workers are unemployed, they tend to remain out of a job longer than their younger counterparts. In June, the average unemployed person age 55 or older took 30 weeks to find a new job, compared with 21 weeks for those under 55, according to the Bureau of Labor Statistics. It helps to explore second-career possibilities and network while you are still employed in case you should find yourself searching for a new job. Mal Krinn, 69, baked bread at home as a hobby on weekends for 30 years, occasionally selling it to local bakeries, while working full time as an ophthalmologist in Bethesda, Md. The day after he retired in 2002, Krinn took a full-time job baking his unique creations, such as green olive bread, wheat bread with pumpkin seeds, and cherry chocolate bread, among others, at his son's restaurant, Inox, in McLean, Va. "Peruse your interests because, as you get older, who knows what kind of opportunities might come along for you to switch careers into something you were kind of doing as a passion or a hobby," Krinn says.
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Be willing to accept lower status and pay. When you're laid off at age 50 or older, it can be tough to find a new job with the same level of seniority. Some baby boomers are now taking a step back down the career ladder. A recent survey by Harris Interactive and CareerBuilder of managers with influence in hiring decisions found that just over a quarter have received entry-level job applications from workers over age 50 (26 percent) and retirees (11 percent). A few employers (7 percent) said older workers have even applied for internships at their organizations. Smaller paychecks often accompany these lower-status jobs. According to an Urban Institute and AARP Public Policy Institute analysis, when older employees switch jobs, their median hourly wage drops from $16.86 at the old job (in 2007 dollars) to $10.86 at the new job. Workers who change employers are also less likely to have a pension and health insurance at their new job. "I make a lot of dough, but I don't make much money," agrees Krinn about his baking job.
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Choose your second act. But despite lower pay, older employees often report feeling happier in their new jobs. Nearly two thirds of workers reported less stressful working conditions in their late-life second career, and 45 percent said their new job allows a flexible work schedule, according to the Urban Institute study. Only 27 percent said they enjoyed a flexible schedule in their former career. "They are giving up money and benefits, but they're getting a less stressful job and probably a job they find more meaningful," says Richard Johnson, a principal research associate at the Urban Institute and coauthor of the study. The more relaxed schedule may be partly due to relinquishing management responsibilities. Only 14 percent of the employees worked as managers at their new job, compared with 22 percent in the past. The share of workers who were self-employed doubled from 12 percent in their initial career to 24 percent later in life.
Get back in business. Americans from 55 to 64 have long been one of the age groups most likely to start their own businesses. Baby boomers have had a higher rate of entrepreneurial activity than those under 34 in every year between 1996 and 2007, according to a recent study by the Kauffman Foundation. Dane Stangler, a senior analyst and author of the study, says baby boomer entrepreneurship is likely to continue throughout the recession, both out of necessity after a layoff and because many people have a desire to work for themselves. Many baby boomers also have the relevant experience and a deep social network that helps new businesses to thrive.
In 2007, Ron Igielinski, 55, of Memphis accepted an early retirement package from Chrysler, where he was a sales executive, and started his own business, RHI and Associates. "I really wasn't ready to retire, but if I didn't take it, I possibly could have been let go through normal layoffs later," he says. Igielinski employs 16 retirees from the auto industry to work as product specialists at automotive events, where they share their extensive knowledge of cars. Although Igielinski doesn't expect his business to turn a profit for at least another year—and his salary is considerably smaller than before—he's happier with his second career. And one of his biggest customers is his old employer, Chrysler. "I had thought for quite a while about going into business for myself," says Igielinski. "The freedom of being your own boss, establishing your own policies, and picking and choosing what geographic area you want to operate in . . . I don't think there's anything better."