Tag Archives: retirement

Making Dramatic Career Changes


toughdecisionsI read an article recently entitled “Thinking about making a dramatic (and scary) career change? Here’s what to consider,” by Sylvia Lafair, (July 6, 2015), on The Business Journals website.

The article got me thinking about the three dramatic career changes I’ve made in my life:

  • taking my first job as an attorney in a corporate legal department in a strange city rather than starting at a law firm (as everyone expected)
  • leaving the legal practice to move into a series of Human Resources assignments
  • leaving the corporate world completely to turn to mediating, consulting and writing

Each of these moves set off the emotions similar to those that Ms. Lafair described. Specifically, for me, the emotions were

     1.  Fear of the unknown and leaving what seemed safe

I knew I could do well if I followed the expected path. That even seemed true of the expected path right out of law school. I didn’t really doubt that I could do what others in my law school class were intending to do—work at major law firms near our school. But setting out halfway across country, and working in a corporate law department? Would I get adequate experience to move into other legal assignments in the future? Would I have the same respect from other attorneys and judges? These were my unknowns.

When I decided to leave the legal department for a Human Resources assignment, I knew the learning curve would be steep. I was jumping into a senior HR position with no HR experience. I thought I knew about half of what I would need to know, and that turned out to be correct.

Then, when I left corporate work altogether, I left a good salary and benefits, not knowing for sure if I could earn what I needed to as a consultant and mediator. It turns out my family has done fine financially, but the worry was there for the first couple of years.

     2.  Excitement at the possibilities a move could bring

The strong camaraderie I felt with the people in the corporate legal department ultimately outweighed the doubts about the work. I made my decision based on who I wanted to work with, and that was the right decision for me. One of the law firms I could have joined right out of law school folded within five years, so it would not have been more secure than the job I took.

And I moved into HR largely because I was bored at the repetitiveness of the law practice I had. I needed something new to interest me, and I knew I needed to move to another job to find it. The choice was to leave the law or leave the company, and I chose to leave the law, because a new field of expertise would give me more opportunities to learn.

And finally, I knew I wanted to spend my time doing many things that a demanding full-time job would not permit. That’s why I switched to consulting, mediating, and writing, which has let me set my own schedule.

   3.  Indecisiveness, while I wrestled with the decision

It took weeks for me to make the first decision, months to make the second, and years to make the third.

   4.  Guilt in leaving expectations of family and friends behind and choosing my own path

Choosing the path less seldom taken is always stressful. Why should I move halfway across the country to take a risky job? Why should I leave a field where I was successful? Why should I leave a financially rewarding career?

I got many questions from family members and friends, who essentially wanted to know why I was “dropping out” as they saw it. However, over the years, I’ve seen many friends and colleagues make similar decisions. I guess I was just an early adopter.

* * * * *

In the end, at each of these periods of indecisiveness, the pain I felt at following the expected path became greater than the fear of the unknown. For others (perhaps those with a healthier mindset), excitement about the future may come to outweigh the fear.

If you are faced with a difficult career decision, take a look at Ms. Lafair’s article and see if her suggestions help.

When have you made a change in your career, and what emotions did you experience?

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Retirement Planning: Start Saving Young, Keep Saving—How Employers Can Help


I recently had a conversation with a young professional woman around thirty years old. She bought a house in the past year and has found it difficult to save beyond her 401(k) plan at work while making her mortgage payment and furnishing the house.

But she hasn’t stopped her 401(k) contributions of ten percent of her income. I told her she was on the right track.

She explained how she planned to resume her deposits to her savings account, and I told her she was on an even better track.

I wish I saw more young employees with this mentality about the importance of savings.

That’s why I was interested to read “401(k)s With ‘Automatic’ Steering Drive Savings Success,” by Patty Kujawa, July 2, 2014, in Workforce Magazine online. Employers can do a lot for their employees’ future financial health by automatically deducting a portion of their wages and depositing it into a 401(k) account.

Most young workers don’t think about retirement. It’s not that they don’t want to save, it’s that they don’t spend any time worrying about what financial resources they will need thirty or more years out.

Employers can help by setting up automatic deductions. Inertia will keep most young workers in their 401(k) accounts, which means most employees will save without any effort on their parts, and will be better off in the future for doing so.

New York Life published an infographic showing how 401(k) plans can grow, based on a variety of assumptions about employee contributions and how automatic enrollment features can encourage employees to save.

nylrps_auto-solutions

Accounting Degree Review has another good infographic showing the power of compounding interest. (And, no, you don’t need an accounting degree to understand it.)

exponential-growth

Employers committed to best practices will also educate their workers about the importance of savings and match a portion of their employees’ contributions.

The best thing that employers can do is provide a company match in 401(k) plans. But even those that cannot afford a match can talk to their employees about how participating in the 401(k) plan can jumpstart their retirement income.

One of my previous employers stressed during frequent employee discussions about retirement planning how (1) Social Security, (2) employee and employer contributions to 401(k) plans, and (3) outside savings provided three sources of income in retirement—and together these three sources could provide financial security.

Now that I’m almost ready to tap these retirement income sources, I appreciate the lessons I learned, and that is what I hope my young friend learns also.

How do you educate employees about retirement planning?

 

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How to Repurpose Your Life Beyond Your Working Years


??????????????????????????????????????????????I recently attended a discussion group in which high-performing women nearing or at the end of their careers talked about how they wanted to continue with the rest of their lives. This group included CEOs of regional companies, executives from national and international companies, owners of multiple franchises, and professionals in the legal and educational fields – all had earned good incomes and had been successful in their chosen careers. Many had changed professions or careers or companies at least once before.

Yet we all struggled anew at this point in our lives:

  • Who am I if I am not a high-performing professional in my field?
  • What do I want the rest of my life to be about?
  • How do I feel about leaving the working world behind?
  • How will I challenge myself in future years?  How will I learn and grow?
  • What will others think of me when I am no longer powerful in my field?

I don’t think these questions are unique to professional women nearing retirement years. Men who are retiring face similar issues. Women (and men) who quit paying jobs to stay home with children must address these questions as well, as does anyone who switches careers mid-stream.

But what is unique to professional women is that the baby boomer women who are now retiring are the first generation of women who “made it” in large numbers. Across the nation, women may not have reached parity with men in numbers or income levels, but many, many women have had successful careers for the last thirty or forty years and are now leaving the workforce. These women – as much as their male colleagues – have defined themselves by their workplace roles. They have thought to themselves “I am what I do,” and family and friends and colleagues have seen them as what they do also.

?????????????????????????????????????????????????????????????As our group wrestled with questions such as how to decide what we want next in life, how to discuss our choices with spouse and family, how to tell friends and co-workers of our decisions, and even what to call ourselves in the next phase of life (“retiree” does not suit most of us), we came to the following conclusions:

  1. First and foremost, give yourself permission to shift focus. You are not what you do; you are much more than that. Only you can define who you are.
  2. Enlist the support of family and friends – your “tribe” who see you as what you are beyond your job. They can help you determine how to change your life to be more authentically you. Some might need a therapist or coach, if you don’t have personal support. Many have found their own wisdom through journaling.
  3. Find resources to aid in your transition. Among those resources should be financial planners, attorneys if you are selling a business and for estate planning, career advisors, family, doctors to assess health issues, elder care consultants if that is an issue for you, and training to prepare you for your next field of endeavor. You do not need to make this journey in a vacuum.

None of the women in my group questioned the wisdom of leaving the work world at this point in her life. We only questioned how to make the rest of our lives meaningful.

More power to us. We have much left to give.

What other resources would you use to assist in re-purposing your life?

 

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Filed under Leadership, Management, Work/Life, Workplace

Obama’s Plan to Cap Retirement Savings — How Much Is Too Much Income or Too Much Taxation?


????????????????????????????????????????????????????????????????????????????????????In addition to limiting itemized deductions for higher income taxpayers, President Obama’s recent budget proposal also includes a cap on the amount that individuals can accumulate for retirement on a tax-deferred basis. For years, taxpayers have been advised to save as much as possible for retirement in 401(k)s and IRAs. The President’s proposal limits the tax-deferred nature of these plans.

The President wants to limit the tax advantage of all retirement plans to the amount needed to buy an annuity of $205,000/year. Under current interest rate and inflation assumptions, this amount is about $3.4 million. See Blake Ellis, Obama: Limit retirement tax breaks for the rich, CNNMoney, April 10, 2013. The proposal combines pensions, 401(k) plans, and IRAs – all forms of retirement savings accounts – in reaching this cap.

While $205,000 is a very nice income for a retiree, why should the President dictate the standard of living for anyone in retirement? Why should $205,000 be the maximum income that people can accrue through tax-deferred savings? What is his philosophical underpinning for this amount, beyond the President’s frequent theme of “the rich have too much”?

As Robert Lenzner, wrote for Forbes on April 14, 2013, in Obama Goes Against the Grain of What America Represents,

“The whole thrust of this recommendation goes against the grain of becoming self-sufficient, taking care of your own finances rather than depending on handouts.”

presidential sealThe intent of President Obama’s cap on tax-deferred retirement plan savings is clearly to bring more money into the tax system sooner rather than later – and, like many of his proposals, his proposal is aimed at the top 1% of wage earners.

One consequence of President Obama’s proposal may be for employers to reduce their support for retirement savings of any type.  An April 14, 2013, editorial in Investment News, titled Limiting 401(k) tax advantage is unwise, explains the problem. Defined benefit plans (pensions) decreased each time Congress capped the maximum salary on which employers could make tax-exempt pension contributions.  Each reduction led to more defined benefit plans being terminated, and accelerated the move to defined contribution 401(k) plans. Now, 401(k)s will be limited, too.

Moreover, depending on the returns in 401(k) plans over time and the assumptions made about what an inflation-adjusted annuity of $205,000 would cost, the savings cap in the President’s proposal could be as low as $2.2 million. At that level, 6% of young workers could be cut back in their retirement savings before they turn 65. If interest rates increase – which they are likely to do over time – even more young employees could see their ability to save for retirement on a tax-deferred basis limited.

For more analysis, see Could Obama’s Plan To Curb The Boss’ Tax Breaks Hurt Workers’ Retirements?, by Janet Novack, in Forbes, on April 10, 2013, or the Wall Street Journal editorial on April 12, 2013, Now He’s After Your 401(k).

Employers and HR executives should watch the development of the President’s proposal carefully, to determine what the impact is on employees at all levels of their organization.

President Obama isn’t the first politician to advocate limiting tax deferrals on retirement savings. But combined with his other attacks on wealthy Americans, he appears dead set on reducing what top earners can save in any way he can – by taxing more of their income now, and by limiting tax-deferred savings in the future.

I am not entirely opposed to increasing taxes on the top earners, nor even on the middle class. But before we increase taxes further, I think it is important to ask ourselves how much taxation is too much. President Obama has never answered that question. I can’t tell if he has even asked it of himself or his advisors. All he talks about is wanting more from the top 1%.

The President’s  answer to how much is too much taxation might define the philosophical difference I have with him and his supporters.

How much do you think is the maximum that the government should take of anyone’s income? Should the government set limits on tax-deferred retirement savings?

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