Planning for Unretirement and Why It Pays Dividends to Work Longer

Several years ago I picked up a book published in 1920 by Simon Wilson Straus, president of the American Society for Thrift. His description of the popular image of thrift in History of the Thrift Movement in America still rings true nearly a century later. “Penny-counting, cheese-paring, money-hoarding practices were looked upon by the public as the ideals sought by those who tried to encourage thrift,” wrote Straus. “The man who practiced this virtue, it was felt, was he who hoarded his earnings to such an extent that he thrust aside every other consideration in order to keep from spending his pennies, his dimes, and his dollars.” Who wants to live a “cheese-paring” life? Sounds bad, doesn’t it?

But an emphasis on thrift doesn’t mean living cheaply– far from it. Thrift or frugality is really shorthand for an approach grounded in matching our money with our values. Straus defines thrift this way: “It is the thrift that recognizes that the finer things of life must be encouraged,” he writes. “The skilled workman, the artist, the musician, the landscape gardener, the designer of beautiful furniture, the members of the professions — all those, in fact, who, through the devotion of their abilities, contribute to the real betterment of mankind, must be given support through our judicious expenditures.”

Here’s how David Starr Jordan, founding president of Stanford University, defined thrift at the 1915 International Congress for Thrift in San Francisco. He told the assembled audience that thrift “does not involve stinginess, which is an abuse of thrift, nor does it require that each item of savings should be financial investments; the money that is spent on the education of one’s self or of one’s family, in travel, in music, in art, or in helpfulness to others, if it brings real returns in personal development or in a better understanding of the world we live in, is in accordance with the spirit of thrift.”

Who didn’t have a moment during the Great Recession of looking around their home or apartment, opening closets and drawers, gazing into garages and storage bins, and wondered, “Why did I buy that? Is this how I want to live? I’m paying off credit card debt for that?” The modern Mad Men have done a bang-up job equating the good life with owning lots of stuff paid for on an installment plan. Didn’t we always know this wasn’t quite right? By thinking through “What really matters to me?” the unretired movement will come up with far more sensible answers to the question “How much is enough?” than the financial services industry. Harry West, the former CEO of Continuum and current senior partner at Prophet, hit on the thrift mindset. In our conversation he remarked on the flexibility that comes with minimal expenses and debts. “When you talk to boomers, what you find is that freedom is really, really important. And you think about that because they grew up in the ’60s or were born in the ’60s, which was a time of freedom,” says West. “Freedom is a low overhead.” That expression should be a mantra for young and old workers alike.

The frugal mindset is spreading, thanks to growing awareness of sustainability. The term sustainability has many shades of meaning, but several themes have emerged in recent years. An awareness of global warming. The desire to cut down on waste. Concerns over the health of the environment. Worries about the vibrancy of local communities. My favorite definition of sustainability comes from the late actor and non-profit entrepreneur Paul Newman: “We are such spendthrifts with our lives,” said Newman. “The trick of living is to slip on and off the planet with the least fuss you can muster. I’m not running for sainthood. I just happen to think that in life we need to be a little like the farmer, who puts back into the soil what he takes out.” Sustainability has gone mainstream and, for growing numbers of people, being frugal is green and being green is frugal.

There is nothing cheap or penny pinching behind the pursuit of judicious expenditures, thrift and sustainability. Instead, thrift is a mindset for trying to match your spending with your values. “In some ways, that what’s financial independence is. You don’t have to answer to anyone because you have enough,” says certified financial planner Ross Levin. “When I am working with clients as they get older or near the end of life, they talk about the things they wish they had done. They talk about their regrets, and the regrets always focus on experiences. It’s always something like, ‘I wish I had done more with the kids when they were younger.’ It’s never ‘I wish I had bought a Mercedes.'”

The urban scholar Richard Florida, in his book The Great Reset, looked at potential economic changes in the U.S. following the Great Recession. His bottom line forecast could have been addressed to aging workers. “The promise of the current Reset is the opportunity for a life made better not by ownership of real estate, appliances, cars, and all manner of material goods, but by greater flexibility and lower levels of debt, more time with family and friends, greater promise of personal development, and access to more and better experiences.”

Unretirement will change not only how an aging population thinks about old age but also how it plans the elder years. Over the past three decades the baby boom generation has been taught to equate planning for retirement with savvy investing. In essence, the retirement planning mantra has been stocks for the long haul, asset allocation and picking mutual funds. But for the typical Main Street boomer the equation has always been wrong and, deep down, we’ve always known we couldn’t rely on Wall Street’s lush return promises. The core of unretirement planning is jobs, and the new unretirement planning mantra is encore careers, networking, and delay filing for Social Security. “You should be looking for the kind of jobs you could do that are challenging and interesting and offer an acceptable income,” says Arthur Koff, the septuarian founder of Retired Brains. “The time to do it is while you’re working.”

Next Chapter in Kansas City, Kansas is housed in a small brick building reminiscent of a bank in a section of town that houses the courts. Karen Hostetler is director of Next Chapter. She turned 65 in 2013. Next Chapter is a small grassroots organization with a mission of helping older workers in transition toward unretirement. I met with Next Chapter activists Pat Brune, Cris Siebenlist and Hostetler in a conference room in the fall of 2013. It was a lively conversation and at one point planning for unretirement came up.

Siebenlist: “Frankly, not everyone will figure it out. They’ll do a little bit of this and a little bit of that. Other people will float around for awhile and say, Is this all there is?”

Hostetler: “You need to plan. It takes commitment to figure it out.”

Brune: “If I could change my transition to what I did, it would have been to be more intentional. I said yes to what came along.”

Hostetler: “Don’t jump into the first thing that comes along.”

Bruning: “I only see my intentions looking back. It’s only later that I see how the dots are connected.”

The work longer message means it pays to invest in your human capital, maintaining your skills and adding to your education. Maybe you’d like to stay at your current company, but put in fewer hours or shift over to a different division. If you want to move on, know your employer is likely to hand you a pink slip soon, or want to start your own business invest in researching your options, from hiring a career coach to investigating temp agencies to picking up a book like Marci Alboher’s The Encore Career Handbook: How To Make a Living and a Difference in the Second Half of Life.

Most importantly, invest in your networks of family, friends, colleagues and acquaintances. Scholars have documented that about half or more of all jobs come through informal channels–connections to friends, families and colleagues. You may also want to create new connections to ease the transition into the next stage of life.

Take this example from Ralph Warner, the founder of Nolo.com, the self-help legal guide business, and author of Get a Life: You Don’t Need A Million to Retire Well. Let’s say it’s a dream of yours to work on environmental causes in retirement, says Warner. The pressures of daily life stop you from getting engaged, however. You’ll get to it, tomorrow. Now you’re 65 or 70 years old. You head toward an environmental organization you admire and say, “Here I am. How can I help you? The answer is going to be probably not much,” says Warner. Maybe help out with the phones or mailings. “Now, take that same person who in their 40s or 50s gets involved with several local environmental groups and at age 70 is a respected senior person. They’re valued and they’re needed. They earned it.”

They’ve just won the aging boomer trifecta: an income, a community and a mission.

Don’t get me wrong: Saving is important. Max out your 401(k) and IRA. Create a well-diversified, low-fee retirement savings portfolio. Savings is your margin of safety because life has a way of upending well-thought-out plans. An unexpectedly ill parent. A divorced child moving back home with the kids. For Robert Lawrence, it was a detached retina.

Lawrence was a teacher at Jefferson Community and Technical College (now Kentucky Community and Technical College) in Louisville. He taught there for about 20 years, commuting up to 10 weeks every year to visit his partner in New York City. Lawrence planned on retiring at age 66. Just after his 64th birthday, he stopped by a colleague’s office for a brief “hello” and ended up listening to a long, detailed explanation why his colleague planned working until age 70. The conversation convinced Lawrence to hold off retirement for another six years.

That is, until two months later. His retina detached and several surgical repairs didn’t hold. He retired at age 65 in 2005, sold his home, downsized and moved into his partner’s condo in Jackson Heights, Queens. His partner, age 75, is a consulting engineer, often putting in 40 hour workweeks. “If it had not been for health reasons I certainly would have been working,” says Lawrence.

A surgeon in New York fixed his retina. Lawrence now volunteers at a hospice in Manhattan, visits with grieving caregivers after the death of a loved one, and helps out at his local church. With a comfortable pension and some savings he chose flexibility over pay. The reason: Lawrence and his partner are railroad “rare mileage” collectors. “We’re railroad fanatics,” he says. They ride the rails throughout the U.S., often seeking out obscure lines to collect their miles. “The only reason I did not seek out teaching in New York is my partner didn’t want me to because of these trips,” adds Lawrence. “He’s in command of his own time as a consultant. If you’re teaching, you’re not.”

When it comes to retirement planning, the goal should be to put your savings on auto-pilot as much as possible. Instead, spend your time creating opportunities for an income and meaning later in life. The return on the unretirement investment will dwarf anything you’ll get from picking a good mutual fund.

Chris Farrell is a contributing economics editor for Bloomberg Businessweek and senior economics contributor for public radio’s Marketplace Money, Marketplace, and Marketplace Morning Report. Excerpted from Unretirement, copyright 2014 by Chris Farrell. Reprinted by permission of Bloomsbury.