The median age for an S&P 500 CEO is 55. Nearly two thirds (59.3%) of our nation’s nonprofit leaders are age 60 or older. In just three short years, a staggering three in five senior executive federal employees will be eligible for retirement (Rein, 2013). They’re part of the massive baby boom cohort that will be moving into their next act over the next two decades. What retirement barriers will these folks face? What are the barriers to moving on?
We used to call that next act retirement, but, for a variety of reasons, retirement is not the choice of many Boomers. Why?
- Americans are living longer, and living in better health for longer.
- The recent financial crisis is forcing some to delay retirement.
- Many love their work and don’t want to leave it.
Even so, many older leaders do express a desire to move into the next act that allows them more freedom. They would like to pass the baton to a successor, or to take a less demanding role, but see potential barriers to their transition. In our experience, most executives need to overcome one or more of five barriers to determine “what’s next.” In this article, we look at these five barriers and explore strategies to overcome them.
- Barrier Buster #1: Ignore the myths and messages about age
- Barrier Buster #2: Develop a balanced life portfolio
- Barrier Buster #3: Get real about work after 65
- Barrier Buster #4: Prepare your organization
- Barrier Buster #5: Overcome your fear of the unknown
Barrier Buster #1: Ignore the myths and messages about age
For years we’ve all been bombarded with the idea that retirement begins at 65, and that it means a cease in productivity. But 65 is just the retirement age selected for the earliest American pension plans, based on the fact that life expectancy wasn’t much older. Social Security further cemented 65 as the official age of retirement, adopting it as the age at which one could accrue Social Security benefits. Given changes in life expectancy, the reality is that your 65 is not your parents’ 65, and certainly not your grandparents’ 65. Someone turning 65 today should be planning for at least another two decades of a very active life. (But, as they say, individual results may vary.) So, put your planning hat on. You have at least two decades to design, if not more. What do you want to do with those years?
The first step you need to take is to sort through the myths and messages in your mind and toss out ones that are no longer relevant. (Easier said than done, we know.) Now you’re ready to think about the story you want to write: your personal life portfolio, which will help you determine “what’s next” for you.
Barrier Buster #2: Develop a balanced life portfolio
Based on the research and our own interviews with retired leaders, the folks who are happiest in retirement are those that have 1) enough money for a reasonable level of financial security; 2) a circle of friends with whom they have frequent, meaningful contact; 3) relatively good health and a regular fitness regime; and 4) activities that connect them to the world in a significant way.
David Corbett, author of Portfolio Life, lays out a life portfolio model that includes five elements:
- community/humanitarian pursuits
Corbett notes that as we go through life, different elements of the portfolio naturally receive different priority. For example, we emphasize vocation earlier in our life, and family as we begin to have children. In his model, retirement is not about cutting ourselves off completely from vocational pursuits. Rather, it’s simply another natural rebalancing of priorities (Corbett & Higgins, 2007).
What does this mean for the exiting leader? Executives often tell us they don’t know what they would do in retirement. They say that much of their life’s meaning is tied up in their work; many of their friends are work-related, and even their avocations are linked to their profession. If you share this barrier, examine your life portfolio and rebalance the five aspects.
Fear about income during retirement is often a specific and substantial barrier. As you assess the income element of your portfolio, analyze the messages that you’ve received about financial security. Many in the financial services industry say we should have resources sufficient to replace 80 percent of current income, while other sources say 40 to 50 percent is probably closer to reality, and more doable for many people. Consult a financial advisor to figure out what number works for you.
That brings us to the nature of work after retirement. Retiring doesn’t have to mean the end of work – unless that’s what you want.
Barrier Buster #3: Get real about work after 65
For many Boomers, the traditional notion of “golden years” retirement – a time of endless leisure – is an archaic (and even unpleasant) notion. Eight out of ten Boomers say that they plan to work at least part time during their retirement years. Among nonprofit leaders, the numbers are higher. In a recent report, 95 percent of nonprofit executives rejected the “golden years” vision of retirement and 60 percent said they plan to work full time until age 70 (Kunreuther, Segal, & Clohsey, 2012).
A number of Boomers will continue to work due to lack of sufficient income to cover basic retirement expenditures and health care costs. According to the Urban Institute, about four out of ten will need to continue to work (Favreault, Johnson, Smith, & Zedlewski, 2012). If you are in this boat, you won’t be alone, and you won’t be venturing into new territory. According to the same report, this is actually not much different from the financial position most Boomers’ parents were in upon retirement.
For these reasons, bridge employment and the encore career is rapidly becoming the new norm. Mark Freedman, author of Encore: Finding Work That Matters in the Second Half of Life (Freedman, 2007) and CEO of encore.org (formerly known as Civic Ventures), lays out three typical approaches to an encore career:
- Career recyclers – those who take skills and experience from one field and apply them to the next, such as a salesperson who becomes a director of development for a nonprofit organization.
- Career changers – those who make a fresh start in a completely unrelated field, perhaps returning to school for new skills or credentials.
- Career makers – those who take a lifelong interest and turn it into a job, perhaps converting a hobby or avocation into a business.
Retirement needn’t be an “on-off switch.” You may choose a phased retirement, shifting gradually into “what’s next.” (However, you must scrupulously avoid the risk that your desire for a phased retirement may clutter an otherwise clear pathway for your successor.)
Essentially, phased retirement is an arrangement to continue working, typically with a reduced workload as a transition from full-time work to full-time retirement. These arrangements may also involve part-time work, seasonal work, temporary work, or job sharing. Such arrangements may be win-win. They can benefit you by providing a higher income than what you might earn performing similar activities for another employer. Meanwhile, they help your employer by preserving needed skills and organizational memory while reducing training and onboarding costs.
But there are limitations to this approach. First, for phased retirement to work, it has to work for your successor. In this regard, chemistry is huge. Success often hinges on the personalities of the departing and arriving leaders. As the departing executive, you need to give space for the successor to assume leadership. This may mean working off-site for a significant period of time, perhaps permanently. You should also set up a neutral process to assess if the arrangement is working, and you must be willing to move on if it’s not.
As ready as you may be, your organization may not be. That’s where the next step is critical.
Barrier Buster #4: Prepare your organization
We frequently hear, “My organization is not ready for me to move on,” and its close cousin, “I’ll be ready to move on after (fill in the blank).” Certainly some times are better than others for a leadership transition to take place. For example, you don’t want to announce a transition when you’re in the middle of a substantial expansion project or when a major contract renewal is looming. But every organization and executive we encounter always has “one more thing” on the agenda. The question to ask yourself is whether that one more thing is critical to fulfilling the promise of your tenure as a leader. More often, it’s just a good excuse for avoiding the scary prospect of “what’s next.”
As you head towards “what’s next,” you have three essential tasks: continue to lead the organization, prepare the way for your successor, and create a plan for the post-career phase of your life. With over 20 years of advising leaders on succession and transition, we’ve learned that it’s virtually impossible for an executive to move on if they haven’t fully considered what’s next and are excited about the prospects that they have created for themselves. If you’re serious about a well-planned departure, you need to invest your energy in all three tasks – leading, preparing the way for your successor and planning the next great phase of your life.
There is one remaining barrier between you and moving ahead: fear. You need to grapple with uncertainty in order to ready yourself and the organization for “what’s next.”
Barrier Buster #5: Overcome your fear of the unknown
The familiarity of day-to-day routines helps many of us feel safe and grounded. Shaking up those routines makes us afraid. Unfortunately, that fear can thwart actions we know we must take. The solution is a good solid game plan that mitigates this concern.
Finally, we encourage you to take full responsibility for your own “what’s next” question and sort out the “right time” to move on in a way that works for you and your organization. Unfortunately, over the past 20 years, we’ve seen numerous examples of executives who did not take on the full mantle of this responsibility. Sadly, some became stale in the saddle, and the board or upper management stepped in to answer the “what’s next” question for them. You don’t want to be there. We often say leading well includes leaving well, so exit while you’re still on top.
Corbett, D. D., & Higgins, R. (2007). Portfolio life: the new path to work, purpose, and passion after 50. San Francisco, CA: Jossey-Bass.
Favreault, M. M., Johnson, R. W., Smith, K. E., & Zedlewski, S. R. (2012). Boomers’ Retirement Income Prospects (Vol. 34, pp. 12). Washington DC: Urban Institute.
Freedman, M. (2007). Encore : finding work that matters in the second half of life (1st ed.). New York: PublicAffairs.
Kunreuther, F., Segal, P., & Clohsey, S. (2012). The New Lifecycle of Work – long-term nonprofit leaders prepare for the future (pp. 8). New York, NY: Building Movement Project.
Rein, L. (August 26, 2013). Wave of retirements hitting federal workforce, Washington Post. Retrieved from http://articles.washingtonpost.com/2013-08-26/politics/41453082_1_federal-workforce-boomers-retirement