Sometimes it seems as if the world is full of retired people who aren’t really retired, since they continue to have professional occupations: some have simply cut back on their working hours, others sit on boards of directors, and still others work as consultants.
This impression is confirmed by the figures. In 2018, Statistics Canada estimated that people over age 60 represented at least 18% of active adults. More recently, a survey by the mutual fund firm Fidelity revealed that no fewer than 48% of high-income earners were planning to start a business, offer consulting services or do freelance work after “retirement.”
A variety of reasons
If you are in this situation or considering this type of scenario for the next stage of your career, it would seem that you are part of a fairly strong trend. You might be interested to know that, even though the need to maintain an income is sometimes mentioned, it is not the main reason why retirement is now seen as a second career. The following graph expands on this.
Ensuring a successful transition
A large number of advisors now offer “coaching” services to help people at this stage of their lives make a smooth transition. Here are the 7 main guidelines that are generally suggested.
- Be prepared
What are you going to need? Should you incorporate your practice for tax optimization purposes, register for the GST/PST, pay income tax by instalments? Will you need to create a web presence, buy equipment or plan to remodel your home? Another consideration: if you are in a relationship, how will your plans fit in with those of your spouse or your family?
- Give yourself a chance
Many retirees who become consultants take a professional break of several months before launching their new practice. The majority also choose to start off slowly, allowing time to adjust to their new profession.
- Evaluate your strengths
Having a job is one thing; convincing a client to entrust you with a specific assignment and pay your fees could be another thing entirely. So one of the first challenges for a new consultant is to define his or her “value proposition.”
- Quantify your value
Speaking of value, one difficulty frequently encountered by people who have received a salary throughout their career is to switch, as a consultant, to fee-based remuneration. How do you decide how much to charge? Some consultants charge by the hour, others on a project-by-project basis: the more important their role is to the success of the project, the higher the fee.
- Build on what you know
It’s not unusual for a new consultant’s first client to be his or her former employer. This scenario can make the learning curve somewhat easier by adding a certain amount of “known” to the unknown.
- Stay connected
The consultants that people want to do business with are often those at the top of their game, and who have a broad network of contacts. To achieve this, even in retirement, it can be useful to keep up with training and be active on social networks.
- Do your financial planning homework
Finally, opening a consulting practice could have significant financial implications, so seeking advice is generally a good idea. For example, starting at age 60, a worker can apply to receive Canada Pension Plan or Quebec Pension Plan benefits, even if he or she continues to work. In this case, however, the person must continue to make contributions, and these additional contributions will result in an improved pension at a later date. How can this potential source of income be coordinated with income from consulting, withdrawals from personal savings and, if applicable, a pension from a former employer? How can the tax bill be optimized?
Another important consideration: the unexpected. For example, health problems are deemed to be one of the main reasons why a person might stop working permanently. In this event, both the income and the lifestyle provided by the consulting practice could be put at risk.
To plan your transition in full knowledge of the facts, and taking all financial factors into account, don’t hesitate to consult your mutual fund representative or financial security advisor.
The following sources were used to prepare this article:
Consultant Journal, “Retire and consult – a consulting business launch guide.”
Fidelity Investments, “Retirement 2020.”
Government of Canada, “Work while collecting a pension.”
Harvard Business Review, “How to Become a Coach or Consultant After You Retire.”
Market Watch, “10 tips for those who want to consult after they retire.”
New York Times, “Why Working Till Whenever Is a Risky Retirement Strategy.”
Retraite Québec, “Retirement pension supplement.”
Statistics Canada, “Table 14-10-0327-01, Labour force characteristics by sex and detailed age group, annual.”