Rethinking Retirement Enables Career Change

Welcome to the second of a two-part post. The?first part ?outlined the foundational advice I've shared with those seeking advice for mid-career pivots (create luck and build a framework), plus one of two points I've added recently (stress the importance of whom you'll work alongside).

This post addresses the second point, an unlikely book recommendation. Specifically, I'll explain why the ideas in this personal finance book have profoundly altered my thinking about work and life.

But first, a caveat.

The ideas in this post should not be considered financial advice. Also, I've written this piece primarily for high earners or those with substantial savings. Suggesting all readers have the same flexibility would be tone-deaf, insensitive, and arguably offensive.

Irrational Fears

I regularly speak with finance professionals about launching a mid-career pivot. Almost all of these former colleagues and clients describe feeling trapped. Eventually, the conversation explores two fears: 1) not knowing what else to do and 2) taking a job that pays less.

The first fear is completely natural. After 20+ years of intense focus in one domain, these highly accomplished professionals have few ideas about what else they'd do or if their skills will transfer. But how could they know? They need to give themselves the space to explore new roles or industries. Note: while not the focus of this essay, the book?Designing Your Life ?is an excellent resource for applying design thinking to discovering your new career path.

The second fear, a job that pays less, cannot be separated from the first. If we're worried about money, we're unlikely to leave a high-paying job to consider new possibilities. The harsh truth is that you might make less money in a new career, at least at first. And that's okay.

The good news is that many of our fears around money are irrational. You might be surprised to find you have enough. More on that below.

It's easier to solve the career change problem by addressing concerns around personal finance. I've been recommending?Die with Zero?by @Bill Perkins because it might help.

Personal Finance Unlocks Career Change

When I read?Die with Zero, I was already six months into my career transition, and the message hit home. Perkins, a hedge fund manager, balances a sober analysis of finances with a goal of optimizing experiences. He avoids the morality and fear-mongering that fuel more traditional guidance.

The provocative ideas in this book massively shifted my mindset around personal finance and eased my unwarranted anxiety.

As I became more comfortable with my lower income from a meaningful role at a startup, I saw how Perkins' ideas could free others to consider taking more career risks.

Reframing Retirement

When we dig into concerns around money, the elephant in the room is retirement, at least for most people.?At 34% on average (see below), it's the largest piece of our personal balance sheet . Unfortunately, our default script is to save as much as possible without a sober examination of what we'll likely need.

Without certainty around key variables like life expectancy, medical expenses, and inflation, many continue building that retirement account. More is better! Plus, we're constantly reminded to max out our 401(k) and cautioned not to rely on Social Security. These ideas aren't necessarily wrong, but society accepts them as conventional wisdom.

But when you review the data, as Perkins has, it turns out that most people save too much.

Oversaving is a problem because it implies we're unnecessarily denying ourselves of financial resources that we could use today. These "extra” savings could provide valuable experiences with loved ones or, to the point of this essay, subsidize a career transition with less anxiety.

Some of the statistics shocked me. Perkins writes, "At the high end, retirees who had $500,000 or more right before retirement had spent down a median of only 11.8 percent of that money 20 years later or by the time they died. That's more than 88 percent left over—which means that a person retiring at 65 with half a million dollars still has more than $440,000 left at age 85!”

It turns out that we don't spend as much in retirement as planned. Our older bodies aren't as eager for travel or other costly pursuits as our younger minds envisioned. Plus, we can mitigate major expense risks with financial products like proper medical, long-term care, and longevity insurance.

You're Probably Okay

The good news is that many high-earning readers may be in better shape than expected.

According to the US Census Bureau's?The Wealth of Households 2021 , the latest survey published in late June, median household wealth, including home equity, is $166,900. The top decile begins at $1,623,000. If you have more than that, you have more than 90% of the US population.

You may have ambitious and expensive plans for your retirement. Maybe the 90th percentile won't cut it. But at what cost?

And if you wait, can you ensure your goalposts won't keep moving?

I have a friend whose net worth exceeds $5 million, and he’s terrified he won't have enough to retire. Of course, this irrational fear prevents him from leaving a job he hates to take a chance on himself.

Considering the worst-case scenarios in the above context is a freeing exercise.

Go back to the chart above. You’ll see the median US household net worth for 2021 was $166,900. To be fair, that’s the current net worth and not only for retirees. But still. And that’s in the wealthiest country in the history of the world.

Again, the?median?is $166,900,?including?home equity. Let that sink in. In most reasonable worst-case scenarios, you may already have a better head start than half of the population. You’ll probably be okay.

Also, remember we’re talking about a career change that might pay less, not retiring today without any income. That’s a far more dramatic step, yet still possible for many.

All of the above won’t resolve all fear, but it should provide some solace. If not, then why is that so scary? That inquiry may reveal more about our complicated psychological relationship with money.

Timing Matters

Once we get more comfortable with the possibility that we have enough for retirement, we can begin to think differently about our surplus savings.

Perkins writes, "Although we all have at least the potential to make more money in the future, we can never go back and recapture time that is now gone. So it makes no sense to let opportunities pass us by for fear of squandering our money. Squandering our lives should be a much greater worry."

The point is that timing matters. Perkins introduces the wonderful concept of "memory dividends." When we invest in meaningful experiences with those we love, we share a lifetime of memories. Contrast that to the alternative of deferring a long bucket list of experiences that may or may not happen later in life.

For example, we might take a special trip with our family while we have the health to manage the physical demands of travel. Or we might allow ourselves to explore a new career that might be less financially lucrative.

To be clear, Perkins doesn't encourage frivolous consumption or wasteful spending. Stuff depreciates while memory dividends compound; they appreciate over time.

Conclusion

There's no shortage of books that can help professionals navigate a mid-career pivot. However, fresh perspectives on personal finance also play an important role in enabling change.?Die with Zero?blew my mind in a good way.

While every situation is unique, conventional wisdom around retirement planning could be too conservative for many.?Die with Zero?reminds us to face our planning with sober intention, not fear. For many, that insight may free them to take a bit more career risk in seeking a more fulfilling life.

Interested in more?

• Die with Zero ?website (not an affiliate link)
• Here's a link to?All the Hacks ?podcast interview with author Bill Perkins