For senior executives there are a couple of inconvenient truths that can have a very significant impact upon their longer term financial well-being:
- The tenure for most senior executive roles is between 2-4 years with the average being just 2.7 years.
- 50% of senior executives are un-employed by the age of 57.9 years. This is in spite of the fact that the average intended retirement age is 63 years old.
Amongst the senior executives we coach the first part of their career is determined by the forces at work the second by choices they make. It is your second career that is critical to your long-term financial well-being. Prolonging your job after the average (enforced) retirement age of 57.9 years is one successful way of providing for a happy retirement.
At 55, Phillip Mackenzie*, a senior partner in a mid-tier legal firm in Melbourne “retired” and promptly embarked upon his new career.
Four years in the planning Phil had taken important steps:
- Two years prior to the departure he was discreetly pitching his new business idea to the market
- He focused on creating new networks. In your second career your networks are different. They are focused on where you are going and the value you are creating for future clients.
- He and his family cut back living expenses to modest levels.
- He put aside two years of living expenses to cover the initial low income period of his second career. Freeing him up to focus on building his business.
- He had successful un-picked his golden hand-cuffs allowing him to leave the firm at a time of his choosing and maximising the financial benefit of his shares and bonus schemes.
By the time Phil was 58 he had built a vibrant growing consultancy business and several company directorships. He had restored his income and was generating a surplus. It had also extended his career to a probable horizon of 70. By extending his income producing years he ensured that he and his wife would have a very comfortable retirement.
Just as important he was much happier. Freed from corporate stresses, focusing on work he loved doing and able to choose the hours he worked and the clients he and his consultancy served.
Simply put senior executives and CEO’s need to develop a second career and extend their working lives. To achieve that it is critical that they develop a plan to create their future job and income streams: whether that involves moving into a consultancy, becoming a company director, pursuing a personal passion or a mix of all these.
Your second career is unlikely to be with a large corporation and to be successful requires considerable fore-thought:
- Build and nurture your networks.
- Find something you are passionate about and create an income from it.
- If necessary retrain, develop new skills and get a coach.
- Creating something new is not a quick fix – allow time for the transition.
Key financial considerations to support this include:
- Having enough liquidity in your finances to fund the transition.
- Having flexibility in your financial plans and structures to allow for changes in circumstances.
- Being able to simply and tax-effectively become financially independent from your employer – this is particularly so with respect of share options, long-term incentive programs, superannuation and other benefits.
- Insurances to cover any health related breaks in income.