Second Acts

Although the oldest of the baby-boomers are on the verge of traditional retirement age, there is nothing traditional about the way many of them plan to spend the next few decades. The old model of a leisure-filled retirement is giving way to a new prototype: Many older workers will downshift from full-time to part-time jobs before quitting completely. More than three-fourths of boomers say they expect to work in retirement, either part-time or intermittently, according to a major AARP study released last year. Why? Most say they want to stay busy, and about one-third of them will need the money to bolster meager retirement savings or replace lost pensions.

The Bureau of Labor Statistics projects that the number of employed Americans ages 55 to 64 will increase by more than 50% between 2002 and 2012. But despite an impending shortage of younger workers, many corporations are still reluctant to hire gray-haired employees, whom they view as too expensive in terms of salary and benefits, and too old to learn new skills. Until more companies overcome those fears, consider the following strategies if you are 50 or older and looking for work, or just planning ahead: Stick with your current employer, but reduce your workload; join the ranks of a new class of workers called cyber agents, who use their home computers to earn a living; or become a "seniorpreneur" and launch your own business.

Ease into retirement

Marlyn Schepers, 72, is at the forefront of the phased-retirement revolution. After 43 years as a structural engineer with Stanley Consultants, Schepers negotiated a deal seven years ago that let him work reduced hours on a flexible schedule, providing him with plenty of time to travel and plenty of income to pay for it. He describes his work arrangement, which averages ten to 15 hours a week, as "almost ideal."

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

Bob Berg, vice-president of human resources for Stanley, an engineering, environmental and construction-services company, calls the firm's decades-old phased-retirement program a "win-win situation" for the company and its workers. "These people have an extraordinary amount of knowledge, and we don't want to see it walk out the door," he says. "Plus, they're still using their gray matter, and the extra money is always nice, too."

Berg estimates that three out of four retirees take advantage of the firm's offer to stay on the job on a schedule that meets their needs. Some stay just a few months, and others, like Schepers, continue for years. The company is always on the lookout for experienced hands to hire as new employees, too. During the past year, for example, more than one-fourth of its new hires were 50 or older.

Because of Stanley's enlightened workplace policies and the value it places on experience, last year AARP named it one of the best employers in America for older workers. This is the third time in five years that the Muscatine, Iowa, firm has won top honors. It was one of 50 diverse companies around the country that AARP selected as top employers, based on their employee-development opportunities, health benefits, workforce age, alternative work arrangements and retirement plans. Health-care companies dominated the 2005 rankings, followed by financial-services and educational institutions. Experienced workers in fields that are short on experts will be able to find plenty of work on their own terms.

Time and money

Back in 1998, when Schepers was 65, he agreed to continue working on a part-time basis. Some weeks, he works 35 hours; others, none at all. The flexibility has allowed him and his wife, Mary Ann, to travel to 20 countries over the past seven years. During his workweek, Schepers passes on what he has learned over the past half-century with the company to a younger crop of electrical engineers.

Drawing a part-time salary also allowed Schepers to delay tapping his 401(k) until he reached 70½, the age when most taxpayers must start taking minimum distributions each year. With his part-time salary, the couple's Social Security benefits, Mary Ann's pension and the 401(k) withdrawals, Schepers estimates their current income is nearly as much as when he worked full-time.

To compensate for losing his health insurance when he went from full-time to part-time, Schepers negotiated a higher hourly pay rate. But at that point, he was already eligible for Medicare and could take advantage of the supplemental medigap policy the company offers retirees, who pay their own premiums.

Because the company doesn't offer a traditional pension plan, it avoids one of the major stumbling blocks some employers face in offering retirees part-time work in a phased-retirement program. Under current federal law, a pension plan cannot pay benefits unless the recipient has either separated from the employer or reached the pension plan's normal retirement age, which is usually 65. Some employers would like to pay partial pensions to workers who have reached the pension plan's early-retirement age, but that's currently not allowed. The IRS has issued proposed regulations to address these concerns but has not yet taken final action.

The dawn of the cyber agent

With all the talk about major American corporations moving their call centers to India, it's no wonder comics go for laughs with the one-liner that "800" is the new area code for Bangalore. Although English-speaking foreign workers may be cheaper than U.S. workers, some companies have found that American culture doesn't always translate. That can lead to bitter complaints about customer service. Consequently, a new, home-grown trend is taking hold: virtual call centers staffed by Americans using computers and telephones in their own homes. Companies that run these call centers are looking for workers, particularly retirees, who want to pick up some extra cash.

Aida Spradlin, 54, of Weston, Fla., joined the swelling ranks of cyber agents four years ago and is delighted with her decision. After accepting an early-retirement buyout from ATT, she was looking for part-time work she could do from home. She found the ideal job with WillowCSN, a Florida-based company that is a pioneer in staffing virtual call centers. It has about 3,000 home-based agents all over the U.S., providing call-center help for AAA Auto Clubs, Office Depot, Sears, Teleflora and many other Fortune 500 companies.

Currently, about 15% of Willow's cyber agents are retirees, and chief executive Angie Selden says the company is looking to hire more of this desirable demographic group because of their strong work ethic, business experience and computer skills. "We have launched a national recruiting program, and the retirement community is one that we find very attractive," she says.

On your own

Willow's cyber agents are independent contractors, not employees. They provide their own computers, designated telephone lines and high-speed Internet connections -- and pay for their own training to become certified agents. Average start-up costs range from $400 to $600, assuming you already have a computer that meets the company's requirements. Agents earn an average of $14 an hour and must put in a minimum of ten hours a week.

Spradlin usually works about 25 hours a week, earning about $15 an hour when she is fielding calls for Office Depot. Although she earns only about one-third as much as when she was a six-figure corporate-event planner with ATT, she thinks having more time to spend with her family is well worth the trade-off. However, she notes that the business model of an independent contractor doesn't work for everyone. "There is no time off with pay for illness or vacation," she says. "And there is no health insurance."

But setting up a small business has its own rewards. For example, if you buy your own health insurance, premiums can be 100% tax-deductible. Ditto for long-term-care insurance premiums, subject to age-based limits set by the IRS. Establishing a home office can also provide tax advantages, such as the ability to deduct part of your household costs as a business expense. (To qualify for these deductions, you must use part of your home regularly and exclusively for your business.) Plus, small-business owners have access to powerful, tax-favored retirement accounts, such as the individual 401(k). (For more information, see "Flying Solo," on page 72 of Kiplinger's Retirement Planning.)

Chuck Wilsker, president of Telework Coalition, in Washington, D.C., says there are about 300,000 people working in virtual call centers around the U.S. But not all companies operate like Willow. Some, such as Alpine Access in Golden, Colo., hire workers as employees to fill their home-based call-center positions.

"This presents a tremendous opportunity for older workers," says Wilsker, himself a telecommuter who subscribes to the theory that "work is what I do, not a place I go." He notes that increased availability of high-speed Internet connections, even in rural areas, and falling prices for powerful computers make virtual call centers an ideal job option for retirees who want to cash in on some of their free time.

Become your own boss

There is a new group of people who are involuntarily retired in the U.S., and many of them are 50 and older, says Jeff Williams, founder of BizStarter, a start-up consulting firm he launched eight years ago when he turned 50. "There's a whole lot of them, but few companies are attempting to bring them back as employees. If you are over 50 and want to work, you pretty much have to be self-employed."

Williams, who has helped more than 4,000 individuals start their own businesses since 1998, conducts live seminars, offers group and private teleconferencing, and sells a two-hour DVD and 250-plus-page workbook, How to Start Your Own Business at 50 and Beyond, for $45 on his Web site www.bizstarters.com. Although there is a wide variety of business opportunities for older entrepreneurs, Williams says most fall into three broad categories: selling consumer or business-oriented services, selling products over the Internet, and consulting.

"All three of these business models can be run from home," he says. "Our start-up clients are spending an average of well under $1,000 to launch a business, assuming they have a relatively new computer, high-speed Internet access and a reliable phone system. That's all they really need." With an MBA and 20 years of corporate experience, Williams helps clients identify their unique product or service, define their potential market and calculate the profit equation needed to create a viable business. "The challenge is to create work that inspires and rewards you," he says.

Hasan Kazi, 61, is one of Williams's satisfied customers. After a lucrative 30-year career with Federal Express, Kazi decided to accept an early-retirement buyout in 2004. But Kazi wasn't ready to stop working completely. After taking a class on how to become an entrepreneur, he continued to work with Williams to develop his plans for a freight-forwarding business, using his years of FedEx experience and partnering with a North Carolina company looking to expand into the Chicago market.

"Jeff showed me how to identify a niche market, how to create financial and marketing plans for the business, and how to secure and retain customers," Kazi says of the business he started last summer. "I didn't do this for financial reasons initially. I did it just to stay busy and involved. But I'm already profitable, and the financial gain is welcome. My new goal is to increase my bottom line."

"Second Acts" is from the all-new edition of Kiplinger's Retirement Planning. For more sound planning strategies and carefully researched investment advice, order your copy today.

WWW

Seasoned workers wanted

AARP has partnered with more than 20 major corporations in the retail, finance, health-care and communications industries, including Borders, Home Depot and MetLife, which want to hire older workers. Visit www.aarp.org and click on "money and work," then "featured employers" for details.

Retired Brains offers a huge database of job postings for older workers in a wide variety of industries. You can get help updating your resume at the online resource center, then post your resume on the Web site.