Your Financial Plan: Transition & Retirement Planning

Treat Your Career with the Care You Give Your Most Important Assets

Your ‘career asset’ is the sum total of your time, talent and potential. It should be managed to maximize its long-term return.

If you could start your career over in a completely different field, would you? More than 51 percent said they would in a recent survey by Korn/Ferry International. So what keeps that majority from making a change? We believe the answer is fear. In fact, career counselors report that employees’ fear associated with financial factors is the most significant roadblock to making changes that could improve their work/life fit and career situations.

Increasingly, Financial Service Group has been advising clients about the need to consider their careers among their most valuable assets, along with their homes, retirement accounts and other traditional assets. Looking at your career as an asset means managing your career as an asset. It needs to be viewed with the objective of increasing value, and if it’s not providing value, we adjust the portfolio—maybe even dump the non-performer (a bad job).

If you consider your “career asset” as the sum total of your time plus talent plus potential, it should be managed to maximize its long-term return just as you would manage other assets. Your career asset return is made up of not only the current salary you are paid, but the satisfaction you receive by doing what really energizes you. That is much harder to quantify but no less of an important consideration in managing your career asset. By not balancing your work and life objectives you run the risk of suffering job burnout—reducing your productivity, raising the risk of stress-related health issues and possibly shrinking the number of quality work years you have before retirement.

When we meet with clients about retirement, we’re finding they regard retirement as an escape from a dysfunctional work environment that no longer fits their work/life objectives. They’re unhappy and believe the only solution is the all-or-nothing work or retire/quit scenario. By viewing a career as a financial asset, you can consider a range of alternatives on the continuum between not working at all and full-time work until retirement. By taking steps to ensure an appropriate work and life balance, you can help to manage your career asset in a way that will maximize your investment in your time, your talent and your potential. Managing the balance will also help ensure that you remain in the work force longer than typically is possible with an imbalanced work-life situation.

 

Client Needs Lead to Development of New Service

That’s why Financial Service Group developed Career Asset Management. We designed this new service for we and other financial planners to use in partnership with career counselors to manage the financial aspects of a career. We focus on optimizing the career asset—extending its value—and extending its life.

Consider a client with peak wages of $75,000 who abruptly retires at age 60. What if, instead, we extend the career asset for an additional eight years? The first three years he works at 75 percent of his current schedule and income, the next three years at 60 percent, and the last two at 40 percent. Assuming an average income and employment tax rate of 40 percent and a six percent discount rate, the value in today’s dollar of that increased income is $174,150. Now, that’s a good return on investment.

We’re oversimplifying here by only considering income. Other quantifiable measures of a career asset include employee benefits, increased pension and Social Security benefit accruals. Plus, there are qualitative (non-financial) factors, such as job satisfaction and social interaction that must be taken into consideration in determining the true value of the career asset.

Career optimization is the process of increasing career asset value. Comparing a career to a rental property helps explain this. If deferred maintenance (career skill set) along with a destructive tenant (employer or negative work/life fit) are allowed to continue, over time the property’s (career’s) value will decline, the ability to increase rents (maximize skills) will be reduced and the useful life diminished. The value of this mismanaged asset (career) is minimized. By evicting the destructive tenant (adjusting the negative work/life fit factors) and rehabbing the property (learning/applying new skills or changing jobs), we can increase future cash flow potential along with the useful life.

Bob Veres, publisher of Inside Information, a financial planner trade publication, calls Financial Service Group’s Career Asset Management service groundbreaking. “It seems to me that this is one of those client-service breakthroughs that dramatically enhances the value of the financial planning engagement and, at the same time, addresses one of those social issues that the world is groping for a solution to,” Veres wrote recently in his publication.

By studying this issue for the past two years in collaboration with our clients, we have learned that by reframing career as a financial asset and working together with career counselors, we can objectively advise and facilitate discussion and change for our clients. By reviewing the data with clients, we can help you get past financial fears. This will deliver measurable results through increasing potential income, optimizing work/life fit and extending the life cycle of your career asset.

Michael Haubrich founded Financial Service Group in 1981. He is known for creatively blending traditional financial planning with current thinking and tools to meet the work and life realities of today’s midlife professionals.