Start an Encore Career

EDITOR'S NOTE: This article is from Kiplinger's Success With Your Money special issue. Order your copy today.

It took Jay Franklin ten years and three attempts to actually retire. "I flunked retirement . . . twice," jokes Franklin, 69, a hard-charging former sales executive from Thornton, Pa.

After being unexpectedly downsized as vice-president of an international company in June 1996, Franklin, then 58, took the summer off. He hung out with his wife, Doreen, at their beach house in New Jersey and played golf with his friends. He had a pension, lifetime health benefits, a respectable investment portfolio and a closet full of custom-made dress shirts. Retirement, even an accidental one, wasn't so bad.

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But when the summer ended and all of his buddies went back to work, Franklin got restless. "There's a loss of identity when you retire, and I missed being in the game," he says. "No one teaches you how to retire."

Jobs aplenty

There's more to retirement planning than padding your 401(k) and signing up for Medicare. Tired of endless hours of leisure and no set routine, some retirees return to their old jobs, find new employers or start their own businesses. (This author didn't have to look far to find someone who was rethinking traditional retirement. Jay Franklin is her older brother.)

In 2006, the number of workers older than 55, including those who are self-employed, reached a record 24.6 million (one-fourth of them were 65 or older). The surge in nonretired retirees will continue. Research by AARP has consistently found that about 80% of baby-boomers say they plan to continue working, at least part-time, past the traditional retirement age of 65.

With the economy sound and the job market strong, many employers welcome the trend. Fearful of staff shortages after boomers retire, companies are willing to offer experienced workers flexible hours, part-time schedules and innovative "snowbird" programs that let employees split a job between summer and winter locations.

Michael Jalbert, president of MRINetwork, one of the world's largest professional-staffing firms, says his company places an increasing number of retired baby-boomers in jobs. "Companies seek people with the skills, experience and work ethic of that generation," says Jalbert. "It's a candidate-driven market."

Many employers also think older workers are just as productive as their younger counterparts, if not more so, according to a recent report by the Center for Retirement Research at Boston College. After surveying 400 employers, the center's staff concluded that managers and professionals have better prospects for extending their careers than rank-and-file workers. The report also notes that midsize employers (with 100 to 1,000 employees) offer the best opportunities for older workers.

On the downside, employers view older workers as more costly than their younger counterparts because of their higher salaries and benefits. So you may need to accept less money to land a new job.

Pocket money

Aside from keeping you busy, returning to work lets you add to your retirement nest egg or pay for vacations and other extras without dipping into your savings. When Cleo Dawson retired from the human-resources department at the Principal Financial Group in 2003, she never expected to work again. But a year later, Dawson got a call asking if she would work part-time interviewing job candidates. Now 68, she helps out in Principal's "Happy Returns" program, which recruits alumni to work on an hourly basis.

Initially, Dawson worked about 15 hours a week at the company's headquarters in Des Moines. Lately, she's conducted phone interviews from home. The hourly pay supplements two small pensions, Social Security benefits and withdrawals from her 401(k). "The first two years, I put the money into savings," Dawson says. "Now I use it for travel and to purchase the whimsical things that I don't need." Her personal treats include two trips to Alaska over the past two years.

Just a few years' more work can have a significant impact on your retirement income. You can continue adding to your 401(k) or other retirement plan, which reduces your current taxes and lets those investments continue to grow. Working longer also means you'll have to rely on your savings for fewer years.

A job can also boost your Social Security benefits. Although you can collect as early as age 62, your Social Security checks will be about 25% smaller -- for the rest of your life -- than if you wait till your normal retirement age. And if you continue to work and collect Social Security before your normal retirement age, you will lose $1 in benefits for every $2 you earn over $13,560 in 2008.

Once you reach your regular retirement age -- which is 65 and 10 months for those born in 1942, who turned 65 in 2007 -- you can collect full Social Security benefits, no matter how much you earn by working. The normal retirement age increases to 66 for those born between 1943 and 1954, and rises gradually to 67 for people born later.

Free as a (snow)bird

Salary is certainly important when you seek an encore career. But other factors, such as flexibility, can be more valuable.

Six years ago, when John E. Johns retired as a pharmacist with a national drugstore chain, he figured he'd pick up part-time work during the six months he lives in Cocoa Beach, Fla., each year. Then CVS made him an offer he could not refuse: Johns could work half of the year in Florida and the other half in Sea Isle City, N.J., where he and his wife, Pat, live during the summer.

Pharmacists are in huge demand, and CVS actively recruits older workers because "it's good for business," says Stephen Wing, of CVS. "Our customers like turning to older employees for advice, and they set a good example for our younger employees with their excellent customer-service skills."

CVS employees who work at least 20 hours a week are entitled to benefits, including health insurance. The snowbird program, which started a few years ago with a handful of employees, now has more than 1,000 participants, ranging from retail clerks to pharmacists and managers.

Johns, 67, takes full advantage of the CVS benefits package. He maxes out his 401(k) contributions and participates in the health-insurance plan. That's a big help because Pat, 62, isn't yet eligible for Medicare. The extra income also pads the couple's retirement kitty, which took a hit during the bear market of 2000–02.

But Johns says he works mostly because he wants to. "Pat and I really love our life," he says. "We follow the sun."

On their own

Some mature workers forsake corporate life altogether. "Boomers want to work in a different way, doing something they love," says Jeff Williams, founder of Bizstarters (www.bizstarters.com), which helps 50-plus entrepreneurs plan, launch and develop businesses. Many are Web-based enterprises because the Internet gives even the smallest new business immediate access to national and international markets.

Since 2000, people ages 50 to 62 have been the fastest-growing group of new entrepreneurs. The 50-plus crowd now accounts for about half of all small-business owners, according to the U.S. Small Business Administration.

Harry Huhndorff, a former design engineer with Energizer, is one of them. Huhndorff retired in 1993 at age 55 with a lucrative early-buyout package. But after six months, he got bored. When a former colleague mentioned that a manufacturing firm needed help with a design project, Huhndorff created his one-man consulting business.

He works about 20 hours a week, accepts only projects that interest him, and spends the rest of his time playing tennis and flying his Piper Comanche 250 with his wife, Karen. His advice for anyone thinking about consulting: "Always tell customers what you can do. Never pretend you can do something you can't."

Aside from enjoyment and income, a business offers tax advantages. If you don't have any employees (other than a spouse), you can set up a solo 401(k) and contribute up to $46,000 in 2008 ($51,000 if you are 50 or older). You can also deduct health-insurance and long-term-care premiums.

About six months after Jay Franklin first retired, he decided to try his hand at a new industry that connects cash-strapped business owners with private lenders. After four years of ups and downs, he quit.

Franklin's next reincarnation hearkened back to his contacts in the paper industry, where he had spent much of his career. He signed on to represent a paper supplier and sell to local printers. But the product wasn't competitive, and his old contacts were long gone. He knew the gig wouldn't last long.

Eventually, Franklin discovered that work was becoming less important. He learned to relax and turned into a professional spectator at his grandchildren's athletic events. Along the way, he bought a boat -- it seemed like the thing to do -- then sold it.

A decade after his first retirement, Franklin has finally settled into a routine of going to the gym in the morning, playing golf in the afternoon and occasionally cutting a business deal on the side. He's content now, but offers this advice to future retirees: "Prepare to retire. It's a huge transition."