Investing in your company plan is easy. The money comes right out of your check, and the investments are automatic. It’s the road, Alvin Franks chose for more than 20 years. His conservative plan for investing worked until a divorce and company changes forced him to change directions and financially start over.
Starting over at age 50
Franks grew up in the Midwest, and spent 24 years as a maintenance manager for a manufacturing company. Working for the same company for a long time, Franks is fully vested in the pension plan. He also has a 401(k) which will provide him the balance he needs when he retires. Franks set his life and retirement plans on cruise control early on in his career.
Frank loves to cruise down the road in his RV or motorcycle.
“We work to live. We don’t live to work. I do have a passion for what I do. I like working, but I like to enjoy life,” Franks said.
Like most people, unexpected speed bumps detoured Franks’ financial plans.
His company froze its pension plan limiting growth. Plus, the company offered long-standing employees an early retirement buyout. With more years to work, Franks faced a crossroad. Should he take an early retirement and start over with another company at age 50 or stay the course? Both choices seemed risky.
On top of the company’s changes, Franks faced his own setbacks. After 20 years, his marriage ended in divorce. Devastation set in. On top of losing his life partner, he says he lost more than half of his 401(k). Still years from retirement, the 50-year-old started over financially and emotionally.
“At 50-years-old, it’s too late to make up my 401(k),” Franks said.
The unexpected speed bumps in life forced Franks to change financial directions. So close to retirement, Franks knew he needed to take the right steps to avoid even deeper financial setbacks.
Retirement planning after divorce
Financial risks are not part of Franks’ financial plan. He’s a conservative investor. He follows the company investment strategy. His portfolio invested in the one-size fits all retirement plan based on his retirement age.
Creating a new retirement strategy is challenging and risky for anyone. However, as an avid biker Frank knows risks lead to rewards. He faces the risk every time he hops on his bike and rides the open road.
“You are more attentive to what’s going on. You can smell stuff you can’t smell in a car,” Franks said. “Riding in pine trees in Colorado in the summer is an incredible sensory experience because you smell that fresh pine.”
With much of his life as he knew it in his rear view mirror, Franks hired a fee-only financial adviser to manage his money. It’s more money out of his pocket, which is tough to accept after losing half your 401(k). Franks knew he had to start over, and he knew investing on his own would not give him the best chance at rebuilding his retirement.
“I just realized I didn’t have the time or passion to take care of it,” Franks said.
Franks relied on referrals from friends, and found a trusted adviser with a proven background. He pays a flat fee every year for the certified financial planner to manage his money.
He pays someone else to watch the market and his retirement funds for him.
It allows Franks to focus on his strengths. He manages projects at his manufacturing plant by day and plans his next road trip at night.
“I’ll probably work until I die, because I enjoy work. But, I want to make sure I have the ability to do things like travel,” Franks said.
Of course, complaining about work is common. After all, it’s work! While it’s natural to think about the negatives of working, there are a lot of positives. That’s why retirement has an emotional impact on people in ways they never imagined. These are the 10 questions you should ask yourself before retiring early.
Early retirement questions
A job offers financial stability, healthcare, a sense of accomplishment, self-worth, schedule and structure, and friendships. You lose much of this when you retire.
Retiring early is not only a financial choice, but a personal and emotional one too. Prepare by asking yourself these 10 questions.
- What’s my passion?
- What’s kind of lifestyle will I live?
- Where do I want to live?
- What do I want my financial legacy to be?
- Will I have a side gig?
- Do I have enough money saved for retirement?
- How long will my money last?
- How will I pay for healthcare?
- Have I done enough planning?
- Why am I retiring early?
What’s my passion?
Retirement is something every worker dreams about at some point in their life. It’s a very emotional decision and one some regret once the time arrives. You have to be ready for it financially and emotionally since your job is tied to your time and life.
So, before you retire, think about what you’re going to do with your life. What’s your passion? Do you want to pick up a fun job to make some extra income? Do you want to volunteer? Will you care for a family member who is ill or take care of grandchildren? Will you travel and work remotely? What puts a smile on your face?
Former Burns & McDonnell CEO, Greg Graves, chose a Hawaiin beach immediately after retirement. However, his long-term goal involves volunteering. He found it fulfilling while working and he told The Kansas City Star it was his “obligation” as a retiree.
While obligation may not be the right word for you, as a rank and file employee, it’s about finding your passion in life. In retirement, you finally have the time to do whatever your heart desires. Ask yourself what that is before you retire. It’ll help you emotionally and psychologically.
When you’re in the trenches working hard every day managing your job and family life, it’s hard to find time for personal passion projects and perhaps even hobbies depending on your industry and position. That’s why it’s common to have an identity crisis after you retire, no matter your age.
A recent MarketWatch article profiles a retired 34-year-old, who doubted his choice so much he stopped telling people. The carefree dreams of life after work didn’t come true. He longed most for the connections with others that the workplace provides. Saying goodbye to 12 hour days meant a different kind of stress. He’s happy with his decision now, but it was a transition. The more you plan for that transition, by picking up new hobbies before you retire, the better off you’ll be.
The answer to this question – what’s my passion – will help you answer the next few questions, including your lifestyle and where you want to live.
Consider not only what you’re passionate about but also think about what life circumstances may find you. For example, most of us don’t anticipate caring for a loved one, but it’s a position many people increasingly find themselves in especially as people live longer and deal with chronic diseases for extended periods of time. Plan ahead if you may financially care for an aging parent.
Plan ahead, thinking about your life goals five, ten, and even twenty years later.
What’s my lifestyle going to be like?
Retirement means something different to everyone. Some people are happy living in the same home they’ve lived in for decades. Retirement is just simpler and more stress-free. Other retirees like to vacation often. Some want to learn new skills or volunteer.
Before you retire, you need to determine your lifestyle post-employment, so you know how much money you’ll need to support the life you want to live. For the first time, you’ll be free. Free from deadlines, free from the alarm clock, and free from demanding bosses.
How will you fill that time?