Retirement Ready? Prepared for the Unexpected?
by Ronald C. Lazof

Whether you call the day you don't get up and go to work retirement or unemployment is mostly dependent on your mental, emotional, and financial preparation for the precipitating event. In either case, on the morning after the event, you get up and after 30 to 50 years of having an automatic agenda i.e. going to work, you have no pressing plans.

Retirement used to be associated with turning 65, receiving a gold watch, your pension, social security and having gray hair. Today many people retire intentionally and voluntarily in their mid 50's or even earlier - through careful planning, or find themselves involuntarily retired (unemployed) through technological or other market factor changes. The difference is in being prepared.

Our society envies those whose industry and business acumen permits them to retire voluntarily at an early age to enjoy the fruits of their labors. At the same time this same society looks down at and feels sorry for those who perhaps find themselves in the same factual circumstances i.e. not going to work (at the same age and financial condition as many who are retired), but who view themselves as being unemployed. The word unemployed carries with it a stigma and an undertone of having been involuntarily terminated with the implication of failure or lack of performance or perhaps even lack of work ethic or some other personal defect (drug or alcohol use, excessive absenteeism, etc.) and the subtext that one is looking to be re-employed. While the word retired implies a voluntary cessation of a daily work regimen and no immediate intention or need for re-employment.

Thus although many feel the difference between being retired and unemployed is one of economic circumstance we believe it is rather one of adequate preparation and self perception. In other words it is not about the money! It is about being prepared, being ready, and having a vision that you are comfortable with what you would like your life to be like in the event of a planned or an unplanned early retirement. Are you ready now? Will you be ready? What steps should you consider taking now to prepare yourself?

In the past it used to be easy to distinguish between employment that terminated voluntarily from that which terminated involuntarily. In the first instance the employee quits and in the second he was fired. Today however it is often not quite so simple as an employee may be put in a position where he is either forced to terminate employment or accept new and unanticipated duties and obligations not originally contemplated in the employment relationship. Or the job for which the employee may have been hired may no longer exist due either to technological change or market condition. It is therefore often difficult to determine whether or not a change of employment is through the affirmative action of the employee or the employer. It may in fact be without attributable fault to either or any party.

It becomes more important in the absence of any reliable third party determinable fact for each party in the employment relationship to make its own independent determination as to the cause for a change in employment. Each party is entitled to their own view of the facts surrounding the termination of ongoing services and may therefore hold themselves out to the world and the community in the manner in which they are most comfortable, ie. voluntarily retired or unemployed. The fact that the employer and the employee may individually determine different and incompatible causes may be as much from a different viewpoint or emotion as from a difference in recognition of market conditions and is entirely acceptable. Consistency may be impossible to achieve and totally unnecessary.

First and foremost American males take their identity most frequently from their employment. What we do in large part forms the identity of how we see ourselves and how we at least perceive others see us. When you meet someone new the most frequently asked question following a person's name is: "what do you do?" The information that is really being sought here is "who are you" where do you fit in society's pecking order?

In other languages and cultures this question is in fact asked and answered directly at the time of first introduction. In Israel and in most of the mid-east the usual introduction is "I am Ron, son of Nathan of the clan Levi of Safed" Thus in giving your name you have given your parentage, family status, societal rank and city of birth. Here in America we answer "I am a lawyer or doctor, etc." giving clues to our employment work hours, socioeconomic status and education. But how do you answer these questions if you are retired or unemployed? If unemployed you might answer in the same way you would have prior to the event, but then you would have to deal with a nagging sense of dishonesty or misdirection and of course you would have missed an opportunity to indicate your current availability.

Alternatively, you might indicate that you were a lawyer, but between assignment i.e. a politically correct expression of being unemployed. Remember that in Israel where your identity is not work or socioeconomically related your answer to the "who are you" inquiry would remain unchanged. But how do you answer if you are retired? Are you proud or at least comfortable with your new station in life or are you sheepish and attempt to make light of the question so as to avoid giving a real answer to the inquiry. The answer to this and many related self identity issues is in the degree of your pre-event preparation.

A large part of your emotional preparation and identity is bound up in being able to comfortably answer this inquiry, either with or without reference to your former title and status. You can temporize by saying that you are the former C.E.O of a well known company, now retired, or you can substitute your new status as an investor or consultant (modern spin speak for unemployed) or if you are truly comfortable you can answer the real question "who are you?" by saying: "I am a full time husband, grandfather and a part-time tennis player." Which of these makes you most comfortable reflects on how you think of yourself , as the facts and your work status, are the same in either case.

How do you want to be seen by yourself and others? Upon your retirement you have a rare opportunity to change your world and community views. Have you adequately prepared yourself to take advantage of this opportunity? Do you have the self-analytical tools to review your current emotional and mental condition and outlook and take appropriate action? If your answer is no or not yet or even I do not know, now is the time for some advance planning and research. Think about what self-analytical tools you will need to acquire and whom you can go to for help in their use. Certainly you will have to bear the cost in terms of time commitment and perhaps financial costs as well but being prepared for the transition to retirement will provide more than adequate rewards for the efforts expended.

How many times have you avoided a chore, a trip, an obligation or just relaxing and having fun with the excuse or the reason that you just don't have the time. More realistically what you are saying is that you have the time, but you have chosen to spend it in a manner which you gave a higher priority whether or not society or your family agreed. Sooner or later you will catch up on all the deferred maintenance and "honey-do" task lists (all of the family albums will have been labeled and indexed) and need to face the reality of allocating your free time in a manner that makes you feel comfortable. Your decision must allow you to feel of value and maintain your physical and emotional health. There are certainly an abundance of options.

Now as a newly retired person it seems that this excuse/reason is gone. You obviously have the time because you have just bought back the 40-70 hours each week that were previously spent at work. How you choose to spend this time is truly a matter of conscious discretion individual choice and prioritization. You can of course opt to go back to work full or part time or as a consultant or you can contribute your time and efforts to a cause you believe in whether of a political, religious, or charitable nature. You can spend more time with family and favorite pastimes and there is always the opportunity for self-improvement.

If your vision of retirement requires that you learn new skills or improve existing ones now is the time to start getting ready. It is probably unrealistic to expect yourself to have the stamina and strength skill to play an enjoyable 36 holes of golf or 6 sets of tennis everyday unless you have prepared yourself both physically and mentally for that level of physical and mental concentration and activity after having spent 40 years sitting at a desk 6 days a week . Start your preparation for your vision of the perfect retirement now by learning those new skills and improving your old skills so that when the opportunity arises you will be ready for retirement and not merely ready to start planning for a retirement already upon you.

If your retirement is free from financial concerns i.e. you have the present ability to maintain your lifestyle and that of your dependents in a manner acceptable to you for the balance of your lifetime, then the decision as to how you use your time becomes a wonderful opportunity and provides you with many alternatives to experiment with. Try your hand at everything that passes your fancy. Experiment and continue to do those activities that give you pleasure, feelings of worth, that improve your physical, mental and emotional health and discontinue those that don't add to your well-being. There is no right answer, there are no time limits, there are no goals other than the journey. You need to learn to take your pleasure from the process and not just the completion of the intermediary tasks.

To some extent your degree of comfort may well depend on your economic circumstances. A precipitating event which has all the hallmarks of involuntary unemployment may from a pre-prepared vantage point be cast as a well earned early retirement. Hundreds of books and countless articles have been written on the financial aspects of retirement planning, so I will not attempt to cover in any thorough fashion this extremely important subject. However, I cannot resist a few general comments. [For those of you who, (a) wish to avoid yet another repetition of the basic concepts of financial planning and, (b) of course for all of you who have completed by age 30 and have consistently lived by your 30 year financial plan (and I know a few who qualify) feel free to skip the next few paragraphs for the rest of you perhaps one more repetition will help.]

In our economic system the grasshopper who saves for the winter day is well cared for during the winter (retirement) while the ant who may have more immediate enjoyment in his day-to-day work life experience will likely have to continue to toil and have fewer opportunities to survive winter's first frost ... Ideally, a secure retirement should be an early and constant goal for everyone. Early action taken towards this goal should provide a comfortable cushion that may allow an early and potentially unplanned for unemployment into a comfortable retirement. The ideal condition of financial resources of course, would be to have the ability at the time of the precipitating event to maintain from savings and passive investment income yourself and your dependents in the same or at least an acceptable standard of living without the requirement of creating either the reality or the perception of loss in comfort, enjoyment or security.

The financial model for achieving this result is simple and well understood. It is in fact merely the funding for a future value, at an estimated future date, at a set minimum interest rate of a lump sum - to be available as of the date of estimated retirement. This sum should in turn be sufficient to provide an amortizing annuity for the balance of the natural life of yourself and your dependents. Because of the power of compounding interest, those that start the process early with 30, 40, or 50 years to plan, save, invest and allow compounding interest to work its magic will have not only the advantage of seeing progress toward their goal and growing financial security, but also the advantage of being able to focus on the most conservative of returns in order to achieve their objectives. Unlike those who by necessity or lack of planning start late and are forced to accept higher risks to get needed higher returns and therefore in many cases achieve only the self-fulfilling prophecy of complete loss, no security and no opportunities. Early planners are more likely to achieve their preset retirement objectives.

For example, if you start planning for your retirement at age 65 when your are 25 years old you will have 40 years to accumulate the necessary lump sum. If we assume that at age 65 you will have a 20 year life expectancy and will need $100,000 per year after tax to maintain your standard of living for each of those 20 years and if we assume a conservative post retirement rate of interest of 4% per annum we can easily calculate that the lump sum needed at age 65 will be approximately $1,375,000. Since you have 40 years to accumulate this amount if we assume the same conservative 4% return we can easily calculate that you will need to save approximately $14,000 per year. If however you don't begin saving until age 45 and have only 20 years to save at the same rate of savings you will only have at retirement $440,000 which will only provide for 5 years of retirement in lieu of 20 at the same conservative rate of interest.

Alternatively you may at age 45 elect to proceed with a higher rate of return which of course implies a higher rate of risk for the investments needed to reach your retirement investment goal. In order to reach your retirement goal in 20 years you would need to achieve a rate of return on your investment in excess of 14%. This of course translates into an increase of over 350% in the amount of risk that you are required to take by virtue of the fact that you delayed the implementation of a financial plan for your retirement from age 25 to age 45!

If, as Plato said, "the unexamined life is not worth living," much of our present day society is in for a rude awakening. More importantly as one of my dear friends is always reminding me, "What is your downside?" How are you injured from taking a little time now and assessing your preparation and readiness for your planned or unplanned early or timely retirement? Always keep in mind that being retirement ready requires not only sound and early financial planning, but also thorough mental and emotional planning.


Ronald C. Lazof currently serves as a managing director of Prism Advisors, LLC, a management advisory and consulting organization. Prism focuses its attention on the entrepreneurial, emerging growth and mid-sized privately held corporate markets. Mr. Lazof served as President and Chief Executive Officer of Behr Process Corporation from 1996 to August 2001, playing a key role in the company's move from a private family held business to a publicly held multi-plant manufacturer and distributor of paints and coatings. Contact Ronald by e-mail: rlazof@zirkel.us and visit http://www.prismadvisors.com/ .

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Copyright 2004 by Ronald C. Lazof . All rights reserved.

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