At Home Between Jobs

Musicians call it “between gigs.” Most people call it unemployed. Some try to enjoy the breather, some go crazy with worry.

Not knowing where your next paycheck is coming from can give you an ulcer, if you let it. You begin to question your job skills (what did I do wrong?), your industry (is this a good field to be in anymore?), yourself (am I even employable?).

The questions keep coming: Should I take a part-time job (if I can find one) or work full time at seeking something that will advance my career? Shouldn’t I wait for my old employer to land that new contract they’ve been hoping for? Because they’ll need me then.

Sue Shellenbarger in The Wall Street Journal cites Bureau of Labor Statistics data that says stay-at-home moms outnumber dads by more than five to one. Still, a record 7.4% of fathers were home in 2009 while their wives worked.

Shellenbarger reports that recruiters advise fathers to consider full-time temporary work, or even a career change, since many executive or middle-management jobs aren’t coming back.

Okay, so now’s the time to focus on finding my dream job, right? But even if I can find it, how can I be sure I’ll keep it?

Instead of searching for it, what if I could create my dream job? Better yet, what if I could create my dream company? And be the owner, and never have to worry about being fired, laid off or downsized ever again?

All those “successful work at home career” ads. Is that really possible? No more rush hour traffic? No more performance reviews? No more resumes?

Time management for working mothers and fathers with regular jobs is hard enough, but I’d have to be really disciplined to work at home. Can I do it?

If not now, when?

The End of Retirement as We Know It

Here’s another area where we Americans have been spoiled: the great stock market boom from 1982 to 2000. In fact, as Megan McArdle points out in this month’s issue of The Atlantic, economists say that, for the whole 20th century, stocks returned about 6% more per year than they should have, given the level of risk involved. (Don’t ask me how they calculated that.)

In 1999, a survey by the Securities Industry Association revealed that investors expected to earn 30% every year. By now, they expected stock prices to have reached the moon.

Why didn’t that happen?

There are lots of reasons, but the technical one is that the equity premium has eroded because the vast amount of data available to everyone in the information age has resulted in a more efficient market. A related reason is the curious market phenomenon that when everyone starts believing the same thing, it usually stops being true.

ING Direct did a survey in the spring showing that one out of four investors still expect 10% to 20% returns. Meanwhile, Smithers & Company, asset-allocation consultants, forecasts an average of 1.8% between now and 2020.

How does this affect retirement plans?

McCardle says, “At an annual inflation-adjusted growth rate of 8 percent, savings of just 5 percent of your income for 30 years will leave you with a next egg big enough to replace almost half your income when you retire. Saving 10 percent will make you really comfortable.”

“But,” she continues, “if the return is 2 to 3 percent, you’ll need to save close to 40 percent to replace almost half of your income.”

How many people do you know who could save 40% of their income?

McCardle delves into the implications for corporate pensions, state and local pension funds, and the Social Security system. She concludes that our history of basing our retirement plans on expected capital gains in our stock portfolios and personal homes
won’t cut it anymore.

Writing on The Economist’s web site, Allison Schrager, who designs investment strategies for retirement accounts, agrees. “I don’t know if it’s ever going to be realistic that everyone saves enough to spend the last third of their life on vacation.”

So, is this the end of retirement as we know it? Should we just accept the fact that we’ll have to work ‘till we drop (assuming our company survives and we aren’t forced into retirement by company policy or simple age discrimination)?

Here’s how more and more people are approaching the problem:

First, figure out how much you need to retire.

Second, look for a part-time business you can develop between now and the end of your regular career. One that has a low startup cost, that you can grow at your own speed, and that has the potential of needing little or no hands-on management from you in later life.

I call it permanent semi-retirement. I also call it fun.

Tomorrow’s Job Market

Americans are spoiled. Compared to the rest of the world, we’ve always had it good. And we assume it will always be that way.

For instance, we expect our economy will always have a job for us. Not just any job, but a good (or at least decent) job. Everybody gets to define those terms for themselves.

If our economy stumbles, we expect our government to fix it, so the jobs can keep coming. That’s been pretty much the case since the thirties.

I don’t have any reason to assume the future will be different, but I do know from experience the perils of assuming. We’ve all heard about the dangers of ASS-U-ME.

A glance at the headlines is not reassuring:

Jobs Dry Up For MBA, Law Grads – Positions no longer waiting when students finish advanced degrees. For years, people with new degrees from top business or law schools had a virtual golden ticket to a high-paying job. But recent graduates have to compete with people who’ve been laid off with the same degree and a lot more experience.

Job Standoff Delays Upturn – Consumers, employers wait for each other to make the first move. Companies won’t hire more until consumers spend more. But consumers won’t spend more until their jobs feel more secure. Until the standoff is resolved, employers will create nowhere near the ten million jobs that economists say are needed to restore the job market to its pre-recession health.

How does it feel to be dependent on the economy, which is increasingly dependent on the government?

When the economy and the government are doing their jobs, so to speak, we whistle while we work. But we also whistle when we walk past cemeteries. Somehow, these two very different sentiments seem to be converging for a lot of anxious workers. Here’s another headline from The Associated Press:

Many Jobs Gone For Good. What sets this recession apart is the variety of jobs that may not return. Technological efficiencies help businesses find ways to produce the same level of goods or services with fewer workers. A survey of 620 companies by Duke University and CFO magazine found managers basically saying, “We didn’t want to fire people, but now that they’re gone, we realize we can get by without them.”

Not good news. Of course, as Scarlett O’Hara famously said, “Tomorrow is another day.”

My question is, will it be a better day? If so, who’s going to make it better?

No wonder many workers of all ages – under 40, over 40 – are thinking about a career change, to get ahead of the trends. Or even about starting a business of their own, to be less dependent on forces beyond our control.

The Chickens Have Come Home to Roost

I remember gathering eggs from the chicken coop in the back yard when I was growing up, so this phrase naturally popped into my head when I read a certain headline recently:

Social Security Outlook Worsens – Payments to exceed intake this year, 6 years earlier than expected.

Oh, boy. Suddenly, all the predictions and projections and warnings that have swirled around this topic for decades just moved up from future theory to present reality.

Surprise! All the experts, who applied all their mathematical brainpower to the problem, got it wrong. Not to mention all the politicians, who applied all their procrastination skills.

Maybe the experts would have gotten it right if they had more data to work with. And maybe the politicians would have addressed the issue after the next election.

Pardon my sarcasm.

A new Congressional Budget Office report says the system will pay out more in benefits this year than it receives in payroll taxes, a threshold that wasn’t expected to be crossed until 2016.

No need to panic, says Stephen Goss, chief actuary of the Social Security Administration. Crossing the threshold early will have no effect on benefits this year; retirees will keep receiving their checks as usual.

Blame the economic downturn, Goss says. Economists expected a quicker, stronger recovery with an unemployment rate of “only” 8.8% this year. Unfortunately, it’s running closer to 10%.

As a consequence, outgoing payments have risen more than expected lately, as millions of jobs disappeared and millions of people applied for benefits sooner than they had planned. Meanwhile, all those lost jobs meant millions fewer paychecks from which to collect “contributions” to the system.

Who woulda thunk it?

Analysts call this a “tipping point” for the program, the first step of an accelerated slide to insolvency. Funds are now expected to be fully depleted by 2037 instead of the earlier estimate of 2041.

By law, Social Security cannot pay out more than its balance in any given year. “When the level of the trust fund gets to zero,” Alan Greenspan stated, “you have to cut benefits.”

(Of course, “trust fund” is a misnomer for an accounting device that simply tracks the net accumulated revenues placed in Treasury securities. A topic for another time.)

So this is a tipping point for Social Security. The question is, will it be a tipping point for Congress? Will they take steps to strengthen the program’s finances before more and more baby boomers leave the work force, stop paying into the program, and start collecting benefits?

More importantly, will it be a tipping point for us? Regardless of congressional action or inaction, will we take steps to secure our own retirement? According to our own schedule?

Now might be a good time to re-calculate how much you need to retire, or even ask yourself, “How much do I need to start my own business, and have that be my retirement plan?

Why Change Careers?

Play it safe, they say. Stick with what you know. Be persistent and things will turn out. Don’t do anything rash.

They also say if you keep doing what you’ve always done, you’ll keep getting what you’ve always gotten. Stop beating your head against a brick wall. When are you gonna learn?

How do you decide which set of advice to follow?

Before you can decide, there’s another question you need to answer: What do I really want?

That is, besides the money. I think we can all agree that a certain level of income is necessary to function as a respectable member of society these days. That amount varies with each individual circumstance, but everyone has a minimum.

But beyond the money, do I want fame, power, love, acknowledgment, admiration, or something else? Do I want to help others? Make a difference? Leave a legacy?

Life is short. (Yes, even for you twenty-somethings out there.) Sooner or later, we notice that time passes quickly. Ask a woman who’s 40 or 50 (or after that) if she ever thinks about a career change.

What we may not notice for a good while, though, is that the passing speed is accelerating. Ask a baby boomer how many times he has thought about a career change.

On the other hand, time is the most valuable (some say the only) asset we really have. Money, property, possessions – none are worth anything unless we have the time to enjoy them.

So what do I really want? Then, once I’ve answered that question, I can address these:

– Does my present career have not just the possibility, but the probability, to provide what I really want? This is a subjective question that requires a realistic answer.

– Am I on track with my present career to achieve it? Start with the desired end result and work backward, setting interim goals and measurable milestones.

– Will the journey with my present career ruin me for the destination? In other words, will the work wear me out to the extent that by the time I’ve achieved what I set out to accomplish, I won’t even care anymore?

– Is there a better way? A way that’s clearer, quicker, and maybe even meshes the destination with the journey, so that winning is not a someday, one day vision, but a daily celebration.

– Am I willing to try? I know, there’s no such thing as try, grasshopper. But there is such a thing as starting. At least, starting exploring. At least, part-time.

Yes, there is risk involved. And minimizing risk is important. You don’t want to be throwing your life savings into some dubious venture. Beware of scams. But there is also the risk of doing nothing.

Still, the best defense is a good offense, said the late coach Bud Wilkinson of the University of Oklahoma. That strategy applies to more than football.

Love/Hate That Job?

Surveys show that, considering today’s high unemployment rate, many people who still have jobs consider themselves lucky. That’s sad.

It’s sad because the same surveys find that, comparing this year to last year, fewer employees are willing to say that they love their jobs.

So they don’t love their jobs, but they feel lucky to have them. In other words, they tolerate their employment situation because they need it to keep food on the table and a roof over their head. They need to keep MasterCard happy, and Visa, and Discover, and especially Countrywide Funding – oh, wait, I mean Bank of America. I almost forgot – nobody could keep Countrywide Funding happy.

Anyway, they need to keep all the bankers happy, and the utility companies, and the insurance companies, and the tax collectors, and their current job is better than nothing.

What about keeping themselves happy? Are you kidding? That one is so far down the list that the question hardly ever comes up.

It’s only allowed to come up on weekends, holidays and vacations. Even then, it’s a bittersweet topic.

Before the event, they wonder if maybe they shouldn’t skip the time off and go in to work anyway, to show the boss how dedicated they are. Also, just in case that younger guy or gal in the next cubicle, who is already getting more face time with the boss, decides to go in.

If they do take the time off, it’s hard to enjoy it with those questions nagging at the back of their mind. Not to mention the dread of going back in on Monday.

Come Monday morning, they wish they had used their off time more creatively. Done something different. Something more energizing, to re-charge the batteries, refill the tank.

All these concerns are multiplied exponentially at vacation time. Consider a recent news article:

Workers Are Sitting On Vacation Days – Job stress has them postponing trips or throwing away time. The 2009 Vacation Deprivation Survey by Expedia.com found that 34% of American employees didn’t use all their vacation days, throwing away an average of three vacation days each year. Worried about job security during the most perilous economic times since the Great Depression, they are postponing vacations under pressure to handle stepped-up workloads in offices with fewer employees and a squeezed bottom line, experts say.

Thoughts about making a change creep in. Should a baby boomer even consider a career change? Is it even possible to make a career change in middle age? Scary thoughts.

So they are torn between watching the clock and being grateful that they have a clock to watch. Things could be worse.

But they hold out hope that things will get better. The stimulus plans will eventually work, the economy will turn around. It always has. They’ll have more choices before long, right?

Good question. Are the good ol’ days really coming back? Or will we be looking back five years from now and calling 2010 the good ol’days?

The Downer Decade

Investment-wise, if the last ten years had been as good as the ten that preceded it, we would all be sitting pretty. But then, if wishes were horses, beggars would ride. Ouch.

Way back when, Ginny and I created a spreadsheet that tracked our current work income, savings, assets and investments. It included modest assumptions of growth in these areas, to project where we’d probably stand at the end of each year until we could afford to stop working, if we wanted to, and live off what we’d built up. I think that’s called retirement calculation.

I remember updating the numbers while sitting at the breakfast table one chilly morning in January of 2000. She came in from putting seed out for the birds and looked over my shoulder.

“Not bad,” she said.

I beamed, as if I had done it all by myself.

“What are you assuming for future growth?”

“Only ten percent.”

“Where did that number come from?”

“It’s a lot less than we experienced over the nineties.”

She frowned. “I think you should make it five.”

I wanted to argue, but I changed the percentage, figuring a year from now I’d be able to smirk about how much we overshot her prediction. Besides, everything going forward still looked pretty good.

What a difference a decade makes!

Today, I’d kill for that five percent, compounded over the last ten years.

Syndicated columnist Scott Burns has an even bigger spreadsheet. He gathers data from the stock market, Federal Reserve, Case-Shiller home price index, the Labor Department and other resources to track what he calls our real wealth. That is, our collective nominal net worth minus inflation.

Guess what? Our real wealth increased every decade after World War II to the end of the century, from a low of 37% to a high of 62%.

So how did the 00s compare to the 50s, 60s, 70s, 80s and 90s?

Collectively, we’ve gone nowhere. Final figures due out soon will show that maybe we even lost ground. Thus, the “Downer Decade.”

The numbers don’t tell you anything you don’t already feel in your bones.

Of course, there are plenty of exceptions to these averages. At the high end, members of the Washington-Wall Street complex came out ahead, as they always manage to do.

At the low end are the unemployed, the foreclosed, and those who are upside down on their mortgages.

Some feel lucky just to be in the middle. Humming that song, “Our Day Will Come.”

The question is, at a zero rate of growth in your net worth, when will your day come? How far out is that year on the spreadsheet when you can afford to stop working and live off what you’ve built up?

Or do you have a Plan B?