Semi-Retirement: A True Story, From A Respected Friend

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Almost 20 years ago, I met an amazing engineer when we worked together at our largest plant. We became friends, and have remained close.  He did well in his career, and “retired” several years ago in his 50’s.  His reputation is well known in my industry, and he’s been in high demand as a consultant since his “retirement”.  Several months ago I asked him if he’d be willing to share his thoughts with you, the reader.  Today, he gives us all some valuable advice from his experience.  

I can’t emphasize enough how much I respect this man, and consider it an honor to be able to share his insights with all of you.  (By the way, if any of you need an incredible “reliabilty engineering consultant”, please let me know and I’ll put you in direct contact with my friend, Bill).

Ready To Retire, But Not Ready To Stop Working

Does that seem to describe your situation?  Then, maybe doing limited consulting may be the answer.

The Transition

transition

First, let’s mention some of the obvious issues to consider as you approach transition:

  • Don’t run away from what you’re doing now. Rather, run toward what you have always wanted to do, if you had the time and focus.
  • Be ready for work divorce. You will miss the people and social side of work, really. (Part-time work will allow you to maintain these and new contacts)
  • You will have time for other leisure activities after retirement, but they will probably not fill the days like you thought. This is where the part-time work completes your life and social network.
  • Continuing to work part-time will extend/delay cash flow issues, so work as long as you still enjoy it, or be prepared to cut back and kick back.
  • There seems to be a real need in industry for consulting services, due to the brain drain with early retirement and reduced work forces. You can probably work as much as you like, but be careful to know how much is enough. It will be easy to find yourself practically working full time without all the benefits.
  • Working part-time may allow for an adjustment period with your spouse, as opposed to going cold turkey. Full-time living can be an adjustment for some, so providing some space may give time for an adjustment period, if needed.

Potential Downsides

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  • Unless you have an agreement with your past company, you may find you will need to pay significant medical costs on your own. This can be an eye opener. Make sure you can bridge the gap to Medicare.
  • Taxes will be still be there, and if working on top of drawing a pension (if you’re one of the lucky ones) and deferred comp and/or stock options, you may find yourself paying more taxes than you first thought. You may have specific timing for the latter, but you probably have flexibility in when you take the pension. The same is true for when to take your Social Security. Consider a SEP IRA. Do the math. You might be surprised what you find.
  • You will need to file taxes quarterly, along with associated fees, if you own your own business. You file on gross income, and then settle up at the end of the tax season. This means there are some cash flow implications. Make sure you have enough in reserve to float the difference. This is also true of all your expenses such as travel costs, hotels, and sundry expenses. Remember, if you work off a 1099 contract, your payments may be 60-90 days out. Try to negotiate as short a period as possible, but be ready for the delay.
  • There will be costs in setting up your own office, but, generally, this will be minimal and you can write off items such as partial home office space, car cost directly related to work, and other such items. You will need some quiet space where you can hold conference calls without the dog barking in the background

Other Considerations

considerations

Some other considerations you will come across are whether to set up an LLC of some kind for your business. I found the state website to be very helpful is getting this done. Remember, there are minimal annual costs in maintaining the LLC that add to cash flow.

You will need an EIN for federal tax filing, as well. Again, the websites available are quite good and will lead you along.

This brings us to an interesting point. Picking an LLC name you like for the long haul. It will become your identity with all your customers. You may find that many of the names you would like are already taken, so be patient and find one you like. You’re going to live with it.

How much should you charge for your consulting work? Of course, the obvious answer is whatever the market will bear, but you might find this not as straightforward as you think. You may need to spend some time doing a market study to establish what you feel is a fair rate. Some client companies have established rates for various types of work that may be helpful. Talking to friends who have gone before you is also a good way to get in the ballpark, if you have that kind of open relationship. In the end, charge what feels right and forget about it. I heard a great quote the other day that applies. “Comparison is the Thief of Joy”. Set your rates and then enjoy the work. Adjust as time goes on.

You might want to think about the proximity of the work you will be doing. Myself, I try to limit work within a distance that keeps me off airplanes. I love driving to clients and the freedom that provides. Pile whatever you need in the car and off you go. No worries about not getting home due to canceled flights or missing flights because of staying late at clients. Freedom!

I hope this helps with thinking about working in retirement and some of the things to consider.

Happy (semi) Retirement

 

 

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One comment

  1. Bill, thank you so much for your insight! My husband is just a couple months out from retirement–I’m sure he knows the exact number of days–and we have discussed many of these points over the past year. I think the first few years may be full retirement for us and then adjust to what feels perfect for us. Your thoughts on the subject have been so very helpful! Mona

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