Too Young to Retire: Boomers Pushed Out of the Work Force
CNBC.com News Editor
David Lundin was a marketing executive at General Motors for 26 years and loved his job. So when he got called into his boss’s office, he just assumed he was being offered a new opportunity at the company.
Instead, they were offering him early retirement.
“It was like a kick in the stomach. It felt like I was being discarded,” Lundin said.
GM did everything it could to help him get another job — career counseling, outplacement service, the works.
But Lundin experienced what so many Boomers, who are in their late 50s and early 60s, face today: They’re having a hard time getting back into the work force and dealing with the prospect of retiring before they’re ready.
“This is absolutely a growing trend, given the events that have taken place in the last couple of years,” Philip Sparacino, a financial consultant with Charles Schwab, said. “For those that are being pushed into early retirement or are leaving the workforce at that age category, they’re finding it very difficult to get back in if they need to.”
The numbers are startling: 41 percent of retirees polled by the Employee Benefit Research Institute last year said they retired sooner than they had expected. Of that group, more than one in four said it was due to changes at their company such as downsizing or closure.
Companies, looking to cut costs wherever they can these days, are often looking to hire younger, cheaper workers instead of older, experienced workers.
“You pit your late-career workers against every job entrant who’s young,” said Ted Fishman, the author of “Shock of Gray: The Aging of the World’s Population and How It Pits Young Against Old, Child Against Parent, Worker Against Boss, Company Against Rival and Nation Against Nation.”
Those who are over 50 with specific knowledge, like engineering, have a little more job security because they’re harder to replace, he said. But those who have more general skills, like manufacturing, are at a greater risk for being pushed into early retirement.
“These are the kinds of jobs that used to be the big inroads into the middle class,” Fishman said. Now, “it’s these workers who have become the most vulnerable workers in the world.”
Initially, they feel betrayed to be kicked to the curb after so many years of loyal service. After that, the feeling is “panic over outliving your money,” Fishman said. “When you’re 50 and over, those are supposed to be your catch-up years, when you save instead of spend. But instead of pouring money into their retirement account, they now have to draw from it. It’s impossible to come back from.”
Meanwhile, those Boomers who are able to land jobs often find they earn 20 to 50 percent less than what they made previously.
“Now, you’ve not only spent down your nest egg [when unemployed], but you’re not making enough money to pour into your savings anymore,” Fishman said. “That’s a real recipe for elder poverty.”
As a result, it’s pushed many retirees who’ve found themselves in this position into what’s called bridge employment. That’s basically a job that may pay less or be part time, but helps bridge the gap between your last job and full-on retirement.
Many retirees at this point choose to go back to school to build new skills or tap their inner entrepreneur to start a business. But starting a business is a big risk. It’s dangerous to take on that kind of risk at a time when all arrows are pointing toward lowering portfolio risk, since you don’t have a lot of time to make up for a lost bet.
Lundin tried both routes — going back to school and starting a business — but still hasn’t restored his financial security.
After being let go from GM, he went back to school and got a master’s degree in psychotherapy, but soon realized that he wouldn’t make the $40,000 or $50,000 a year he needed to maintain his lifestyle, which includes owning two properties in Detroit. He continued applying for corporate jobs in market research and other fields related to his marketing experience but had a hard time even getting an interview. So last May, he decided to buy a Molly Maid franchise.
It sounded like a good bet, buying an existing franchise, instead of embarking on a new, untested business. However, he has yet to make a profit on the business, which he attributes to buying too small a territory. He estimates that he’s already lost $100,000 and isn’t sure how much longer he can hold on.
“I decided when I invested in my franchise to shoot the moon,” Lundin said. “If this doesn’t make it, I will probably not shoot the moon again,” he said.
He’s still hoping for a lucrative psychotherapy or corporate job to come through, though he’s already working on a plan D: He might take his passion for automobiles and try his hand as a car salesman.
“I’ve got to do something fast to get some positive cash flow,” he said.
Bob Shirilla found himself in a similar position: He worked as an IT project manager for a Fortune 500 company for more than 30 years. He was pushed into retirement in 2008 at the age of 57.
“I wasn’t financially or emotionally ready to retire,” Shirilla said.
What’s worse, the retirement package wouldn’t bridge the gap: “It clearly was not enough to live on,” Shirilla said. Plus, there weren’t any benefits or hospitalization, and he had survived colon cancer just five years earlier.
“You feel like you’re not wanted anymore,” Shirilla said.
He, too, decided to go the entrepreneur route, but his entry was a little smoother: His wife, who had quit working to raise their kids, had since started a gift shop business.
“I secretly, my entire life, wanted to be an entrepreneur,” Bob Shirilla said. “But when we were raising our two daughters, I didn’t have the courage to leave my secure job.”
So when he lost his corporate job, he decided to help wife JoAnn run her business, which sold tapestries, throw blankets and other personalized items. She processes all the orders and runs the daily operations, and he handles the marketing. They’ve had to make some adjustments: They’ve closed all their brick-and-mortar stores and now run the whole business online through two web sites, Simply-Bags.com and Keepsakes-Etc.com.
He attributes a lot of their success to his wife: She’s the one who nailed down their target markets and the one who convinced him to take a search engine optimization course just 20 days after being let go from his corporate job. And, while being kicked out of the corporate nest was scary, he says he’s happier now.
Of course, starting your own business isn’t for everyone.
“Be sure that you are financially able to do it,” said Marie McIntyre, a career coach and author of “Secrets to Winning at Office Politics.”
“If you are in a financially precarious situation, you don’t want to sink your living expenses into a risky venture,” she said.
Regardless of what you choose, McIntyre offers these tips:
- Make sure you look current — everything from your resume, to your skills and even how you dress. (Note: That doesn't mean dress young; it means dress current and age appropriate.)
- Don’t feel the need to put every job you’ve ever had on your resume.
- Be prepared to accept lower pay.
- Believe in yourself, that you have something to offer.
- If you’re going to start a business, know what it is and that people want it.
“You need to be really sure there is a market for whatever it is you’re trying to sell,” McIntyre said. “You have to fight the tendency that is human nature to be overly optimistic. The optimism gives you the confidence to take on a business venture, but make sure it doesn’t blind you to some of the real risks you have to assess.”
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