Book: Purpose and a Paycheck by Chris Farrell

Chris Farrell is senior economics contributor at Marketplace, American Public Media’s nationally syndicated public radio business and economic programs. He is economics commentator for Minnesota Public Radio and host of its series, Conversations on the Creative Economy. An award-winning journalist, Chris is a columnist for PBS Next Avenue and the Star Tribune. He has written for Bloomberg Businessweek, New York Times, Kiplinger’s and other publications. His most recent book is Purpose and a Paycheck (HarperCollins Leadership).

Below Farrell outlines the reasons he wrote the book and what it can mean to a generation looking for what’s next.

If you’re reading this newsletter, you know that America’s population is aging, although you might not remember the numbers. The Census Bureau forecasts that individuals 65 years and older will account for more than 21 percent of the U.S. population in 2030, up from 15 percent in 2016. Census also expects that the number of people over 65 years of age will outnumber children under age 18 for the first time in U.S. history in 2035.

Sad to say, an aging population stokes fears of long-term economic stagnation on Wall Street and in Washington D.C. The doom-and-gloom story runs along these lines: Too few young workers will have to support too many dependent elderly. The wellsprings of creativity, innovation, and risk-taking—long linked with youth—will dim with rising numbers of elders. The economy’s vitality will erode with an aging population. Sound familiar?

My new book Purpose and a Paycheck (HarperCollins Leadership, February 2019) says “bunk” to conventional wisdom. The aging of America’s population represents a historic moment to seize and to create a more inclusive society and vibrant economy.

The book largely focuses on entrepreneurship, work and innovation in the second half of life. Growing numbers of experienced adults are starting their own business and working well into the traditional retirement years. An impressive body of scholarly research strongly suggests that given the opportunity, people in the second half of life are as creative, innovative, and entrepreneurial as their younger peers–if not more so.

Tapping into the talents of experienced workers and breaking down the widespread barriers of pernicious age discrimination holds the promise of boosting the economy’s dynamism and household incomes.

For example, entrepreneurship and youth are practically synonymous in popular perception. Yet the reality of entrepreneurship is that the 55-to 64-year-old age cohort accounted for more than a quarter of new business startups in 2016, up from nearly 15 percent in 1996, according to the Kauffman Foundation. The Bureau of Labor Statistics reports that the self-employment rate among workers age 65 and older was the highest of any age group.

Older Americans are particularly suited to join the startup culture, whether they are pushed into it (involuntary retirement, age discrimination) or pulled into entrepreneurship (acting on a dream, wanting to be the boss). Owning a business with or without employees is a source of income that offers opportunities for exercising creativity and engagement. People in the second half of life have experience, skill and, most importantly, a network of contacts developed over the years. Self-employment—a category of entrepreneurship—can be a savvy way to phase into retirement.

Financing for most startups is usually a bootstrap operation and, on average, older households have more money to tap (without risking retirement savings). Thanks to the rise of digital technologies—internet, mobile, and sharing apps— it often takes little money to open for business. The office is typically the home or maybe a low-cost cosharing workspace.

Experienced adults are experimenting with other ways to earn and income. Popular options include phased retirement with the same employer; negotiating part-time work with the same or different employer; shifting to bridge jobs and encore careers; and gig economy work. Here’s one indication of the embrace of work: According to the Bureau of Labor Statistics, between 1995 and 2016, the share of men 65 to 69 in the labor force rose from 28 percent to 38 percent. The comparable figures for women were 18 percent and 30 percent.

The grassroots movement rethinking and reimagining the second half of life has implications for those nearing the traditional retirement years. The defining question has become “What do I want to do next?” Earning even a slim part-time income during the retirement years helps pay the bills and stretch out savings. Look at it this way. Say you earn $20,000 in part-time income. That’s the equivalent of a 4 percent withdrawal rate from a $500,000 portfolio. (The 4 percent number is a rule-of-thumb for figuring out how much you can safely withdraw from retirement savings.) At the same time, people are also looking for work that makes a difference. That’s why the book is titled Purpose and a Paycheck.

Too many people still assume older Americans have little to offer. The word “retire” stems from a French word for “withdrawing” or heading into “isolation.” I find the concept of withdrawal is bleak. So, let’s retire the word “retirement” and substitute the catchphrase, What’s next for me?