Bridging the Retirement Gap With an Encore Career

Mark Miller: Hello, I'm Morningstar columnist Mark Miller, and I'm here today with Marc Freedman, who is the author of The Big Shift: Navigating the New Stage Beyond Midlife. And he is the CEO of Civic Ventures, a nonprofit think tank, that's focused on advancing the cause of midlife career transitions. Marc, it's great to have you here with us today.

Marc Freedman: Thank you. It's a pleasure to be here.

Miller: Marc, what is the next big stage in life for people who are at age 50 or even in their early 60s? We used to think about that next stage as being old age, right?

Freedman: And retirement, so many people for so many decades started thinking about moving into retirement in their early 50s; it was just a few years away. But people who are coming up to that juncture right now are realizing they are not going to be old for 20 years and probably can't sustain a retirement that's decades in duration. So they're thinking about this chapter in a new way, and I think, what we're beginning to see is the formation of a new stage of life between the middle years and anything resembling old age.

Miller: Your book is very visionary in looking at what that might mean, this new stage and trying to think creatively about helping people to think about this. One of the things that strikes me in reading your book is how optimistic it is. I mean, here at this moment we're coming out of a very tough time from an economic standpoint, and you're talking about people dreaming big dreams and starting big new things going on at this time of life.

Freedman: Well, you know, one way to think of it is making virtue out of a necessity. We are living longer, and we are going to have to work longer. But I think there is enough time for people in this period to do something significant, and I think for the first time ever larger numbers of people are moving into this chapter, and so in the book I am arguing that we need to think of this as a distinct period of life, and so in some ways you could see it as looking forward. And in other ways looking backward. We invent stages of life every 50 or 100 years. There was no adolescence in this country before 100 years ago, and then we had a proliferation of young people, who aren't quite children that weren't adults yet, and we invented the teenage years.

And I think, what's happening now is we've got large numbers of people who aren't in midlife anymore, but they're really not going to be old as we were talking about for a long period of time, and this period gets portrayed as kind of half of midlife, and half of old age, such as the young old or the working retired. We end up thinking of this group, I think, as the oxymoronic years. But I think it deserves its own name; it deserves its one social institutions and public policies. And in fact the people who are flooding into this period are the largest group in society. They dwarf the segment of the population that's truly elderly, and so I think this is not just a new phenomenon, but it's a mass phenomenon.

Miller: Right. So one of the things that makes this significant from a broad kind of policy sense or even economic sense is you've got this gigantic wave of baby boomers, who over the next 20 years are going to sort of crash into this period, right, like a wave?

Freedman: Right.

Miller: It doesn't happen all at once, but what makes that significant is that it's the largest generation in our country's history, and so whatever stage of life that group is in has economic and social ramifications. So a sort-of-negative stereotype you hear is that idea of, 'Oh, my goodness. The population is aging. It's going to be an albatross around our necks.'

Freedman: Right.

Miller: You're painting a potentially different alternate scenario where people continue to be productive for another 10-plus, 15, or 20 years, right?

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Freedman: Yeah, we hear a lot about dependency ratios, how walkers are going to outnumber strollers. It's almost as if people turn 60 and they suddenly become infirm, and that's true of some people. But really we've got people who have an enormous amount of experience, and I think for the first time in our history in these big numbers, we have the time to do something with it and that combination of experience. And I think there is a motivational dimension, too. As people move into this stage of life, they realize there are fewer years ahead than there are behind, and that changes your priorities. It's your perspective, but there are enough years ahead and enough capacity to do work that draws on that experience. And that in some ways could be your legacy, and I think this group in some ways in the past when people reached this point, the best they could hope for was leaving a legacy, maybe having a park bench named after them. But I think this group can live a legacy, and when you put that against tens of millions of people, I think that's something that could be a productive windfall for society. It can even change the culture.

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Miller: So this, you're saying, ties back to the word you used earlier in our discussion, significance. And the work that your organization, Civic Ventures, does is focused around this idea of social meaning. You've developed this idea of the encore career, which I take to mean the notion of a second career or second act with some meaning. It's not just a matter of earning money, but doing something with meaning. You talk in your new book about the notion of being a good ancestor. How will people in the future think of us as ancestors; I thought it was an interesting way of putting it. But talk a little bit about that, that connection point that you see with not just the idea of staying busy, but work with meaning, if you will?

Freedman: I think there's a coming together in this period of the sense of mortality that we know that the road is finite, the appreciation of a new longevity that we have enough of time to do something with that perspective. And also the realization that as people move into this stage of life that you don't live forever, and that we're a species that passes on from generation to generation, and that's why I think this legacy impulse is so important to so many people. And the encore career, which is growing rapidly in numbers is at that intersection of a paycheck, which many people still want to have in this period.

Miller: And need in many cases.

Freedman: Yes, and need, and a sense of purpose, a reason to get up in the morning and use of one's accumulated experience to have an impact in the world and particularly to leave the world a better place than we found it. So, it's a kind of hybrid, a practical idealism that I think is really fitted to where people are at, at this stage of life, that desire to live in a way that's not only personally meaningful, but that means something beyond ourselves and beyond our generation. I think that's one of the reasons also that this is not just about baby boomers. The boomers are developing this period of life, but their children and millennials are going to live longer lives than the boomers have, and they'll eventually move into this period. So I think if we develop this as a time of productivity, contribution, and growth, it's these younger generations that will inhabit that time in a way that's most fulfilling.

Miller: It's a long-term game changer, not just applicable to one group.

Freedman: Right, and I think, it actually is going to change the whole shape of American lives, and really lives throughout the developed world because young people in the future will make different decisions at 18 or 22 knowing that there's more than one bite at the apple. Why go to school for seven years, when you're 18, when it's hard to know what you're going to want to do at 58. I think, our whole pattern of education in life is going to change. I think, people are going to save less for a balloon payment of disengagement at the end of life and more for these inevitable transitions, and I think, for many people that transition comes in the late 50s or early 60s.

Miller: You've talked in your book about a couple of practical ways that we could help enable these transitions. And comments you just made remind me of a couple of them, the idea of the individual purpose account as a cousin to the individual retirement account. Explain what that means?

Freedman: Well, that idea was prompted by an article I read a few years ago of boomers stealing money from their children's 529 accounts to go back to school themselves, and I thought well why don't we actually create a front door instead of people having to go through the back door. And we're used to saving for our long retirement, but for those people who want to take a break to go back to school, a savings account that focused on that transition period and that had some tax advantages would be particularly useful, because this transition period is where a lot of people take a big financial hit. There was just a story in one of the national news magazines about a woman who went from being a pediatric nurse to becoming an Episcopal priest. There's been a doubling of people over 50 going to divinity school, but it cost her $100,000. She had to sell her house. She had to sell her car. I think we could do a better job of saving for this transition period, and I think a lot of people would want to take a year or two of what was going to be a long retirement and put it in this period so they could shift into this new stage.

Miller: It makes sense as a financial strategy, if you will, in that if you accept the notion, which I certainly do, that working longer is a way to enhance retirement security. OK, how are we going to get there? Not everybody can afford to just go for two years without a paycheck while they are pursuing a new degree or training. So, the idea of planning for and saving for something like that I guess is your thought.

Freedman: As you were saying, this is not just an individual matter. When you have tens of millions of people going through a transition like that, society has a stake because if these people remain productive, if all we've invested in their human capital continues to payoff, if they continue to pay taxes, if they defer taking entitlements until later, it's going to help balance the books as we go through this demographic change. This is why I think we should make some changes to programs like Social Security.

Miller: You have a specific thought in the book about that, right, the idea that you could gain access to Social Security but then stop it again.

Freedman: Absolutely. I think of greater flexibility where people could move a year or two up when they want to go from being a pediatric nurse to becoming an Episcopal priest or from being an Episcopal priest to being a pediatric nurse. They're going to have tuition bills, what about taking a year or two of social security, moving it up to that period, and then delaying your full benefits to some actuarially adjusted time beyond when you're immediately eligible.

Miller: So, using it almost as a form of unemployment insurance, if you will, rather than retirement insurance which is exactly what Social Security is?

Freedman: It's true. You can also see it as a human-capital investment, and I think this combination of personal savings and societal investment can make it easier for people to work not just another year or two, which many economists think would help benefit the society financially and in a fiscal sense, but rather in whole other career, not just a year.

Miller: From a practical standpoint, what are some of the avenues that you recommend people can look to? Again, we are still in a really rough jobs environment. People could be listening to this conversation and saying, "What do they mean go out and find a new job at age 59?" From a practical standpoint what are we talking about?

Freedman: Well, I think we are talking about a lot of what young people do to move from school into the workforce. They do internships, and I think a lot of people at this stage of life they have been so busy doing what they have been doing for 30 or 35 years. First of all they are tired. They need a period of renewal if there is going to be another chapter and their contributing life, and they oftentimes need to go back to school or try on some new roles. A lot of research on people who successfully make career changes all along the life course shows that the best way to do it is to get a foot in the door, to do internships and to do fellowships. At Civic Ventures, we've created an Encore Fellowship, which is kind of gap year for grownups. It's a chance for people, who have been too busy raising kids and making a midlife income to think about that they are going to do next, to actually work in an organization that they have an inkling in exploring. And it's a chance for them to figure out what they are interested in; the abstract is really going to make sense in a workplace.

Miller: Now, another thing that Civic Ventures has really put a big spotlight on is this notion of social entrepreneurship. Talk a little bit if you would about what that phrase means for your organization and your work?

Freedman: We tend to think of social entrepreneurship as being the exclusive province of young people, and many young people have done spectacular work. Teach for America, for example, was created by Wendy Kopp based on her college thesis. But there is a second wave of entrepreneurs who are using their midlife experience, who see problems in society and want to bring some of the solutions they have together. For example, Gary Maxworthy, he is one of the winners of the Purpose Prize, a prize we give out at Civic Ventures each year for social entrepreneurs over 60, wanted to join the Peace Corp when he was in his early 20s, but he had a family to support, he couldn't do it.

In his late 50s when his wife passed away he took a step back and revaluated his priorities. He had worked in the food distribution business. He joined the VISTA program, and they sent him to the San Francisco Food Bank. When he got there he discovered that Food Banks in the state were only giving out processed food, canned food. He knew the growers in California were throwing away an enormous amount of fresh food because it was blemished in some way. He created the Farm to Family program, because he knew how to distribute fresh produce that last year gave out 100 million pounds of fresh produce to Food Banks all throughout California. I think that's the value of experience in a nutshell and also a glimpse into the kind of entrepreneurship that's possible as people remain engaged later in life.

Miller: The Purpose Prize itself is an interesting thing. I think that our viewers might be interested to know a bit more about it. I sort of think about it as the Oscars for social entrepreneurship and every year you're putting the spotlight on the success stories of people who have figured out things to do like the story you just told about Gary, right?

Freedman: Yes, and I think it's a marriage of innovation and that kind of practical idealism that's at heart of the encore careers. I could tell you another story, Robert Chambers, who had worked in the banking business in midlife had tried to retire to New Hampshire, realized he didn't have enough money. So he went to work at a used-car dealership where he discovered that this dealership and a lot of other dealerships in New Hampshire were making all their money off of unsophisticated rural buyers; they called them woodchucks. And he saw this happen over and over again and eventually had a moral problem with what was going on around him, and he split off from this used-car dealership and created something called Bonnie CLAC (car loans and counseling) that sells fuel-efficient new cars and provides credit counseling to low-income rural buyers. Last year, they gave out thousands of new-car opportunities to low-income rural residents, and he I think encapsulated the spirit of the Purpose Prize when he got called to the White House for a social innovation gathering last year. He said that he was old enough to know injustice when he saw it and experienced enough to do something about it.

Miller: Marc, thanks for joining us and thank you for watching.