Transitory Retirement, Permanent Inflation

It looks like “transitory retirement” has come to replace the idea of “transitory inflation“.

For months, the Federal Reserve Bank in the US told us that the sharp pick-up in prices was a transitory phenomenon. Everything was going to return to normal in due course (whatever “normal” was going to look like). The Fed’s 2% inflation target, as measured by the consumer price index, was still viable without the need for additional policy intervention.

That thinking has been well and truly been put to bed. Inflation is here. And it’s not going to go away anytime soon of its own volition. The recent 8.5% inflation read tells us times have changed. The US hadn’t seen inflation levels above 8% since 1981. It also marked the thirteenth month it had sat above the Fed’s target. That’s a worrisome underlying trend.

That, of course, has had a massive impact elsewhere. Many older workers that chose to leave the workforce in the aftermath of the pandemic have had to have second thoughts. There’s a sudden realization that maybe their pension pots aren’t going to stretch as far as they had previously expected.

And, of course, it’s not just those exiting the workforce closer to traditional retirement age. Imagine you’re a 35-year old that has doubled-down on the FIRE movement (“Financial Independence, Retire Early”).

You’ve had enough of your job. It’s sucking your soul. You’ve saved 25x your annual expenses (which is a basic tenet of the movement), but suddenly realize that food, utilities, transport, accommodation and so on aren’t priced at the level you had assumed. The bar has been reset and some of this inflationary pricing is “sticky” (it’s here to stay for a lot longer, at a higher level, and won’t be transitory).

That’s the reality for many people. We’re still early in this journey. But the “Great Resignation” could become the “Great Return To Work” for many. That assumes that they’re able to find work that suits. Just because you want to work, it doesn’t mean you’ll get the type of role you’re hoping for.

We all here about the labor shortages. But the reality of rejoining the workforce could be very different. Not everyone is geared up for coming out of retirement to join the ranks of the hospitality industry after spending decades as an office manager. We also cannot ignore the fact that age discrimination is real. The whole world’s been turned on its head. We are navigating VUCA.

Rather than getting sucked into the doom and gloom of worst-case thinking, it’s worth looking at ways in which to adapt to the new reality. The same goes for adjusting to job loss.

So how should a young / old retiree prepare themselves?

Don’t burn bridges

Leaving a job and career can feel liberating. You’re free. You may want to tell your boss just what you truly think about him. And you do so – in a blaze of glory.

One year later you realize inflation is ripping through your cash pile and you need to return to the workforce. And you need references. Or you simply need a friendly face to put a word in for you in your former organization.

As the saying goes, “Be nice to people on your way up because you’ll meet them on your way down.”

Save, Save, Save

This is really about money management in general. Get on top of it, manage your budgets, lower your expenses if need be, stay pragmatic.

Are you a FIRE enthusiast wedded to the “4% rule”? This is the rule of thumb for retirement spending, where you apply a “safe” withdraw rate of 4% of your pension pot annually. Although the theory has been backtested, it’s never been properly applied in a real-time, post-pandemic, inflation-crazy environment where human emotions are really put to the test.

Maybe the 4% rule will work. Maybe it won’t. If you want to be more conservative, consider 3.5% or 3%. Regardless, it’s vital you get your personal finances aligned – Personal Finance – More Than Just Numbers is just one resource that can start you on your way.

Get a side hustle / Part-time job

Just because you’ve “retired” it doesn’t mean that you can’t keep earning money. You’ve simply retired from your career (for now).

It’s never been easier to build extra income streams, thanks to the availability of technology and a world (corporate or other) more willing to outsource tasks. Check out sites like PeoplePerHour, Fiverr and Upwork to pitch your services.

If the world of making money online is all new to you, check out Beginner’s Guide to Online Side Hustles. You also need to know the ropes so that you can navigate the scams and sharks in this space.

Stay relevant

This is vital in this face-changing environment.

Skills and technologies obsolete. Jobs exist today that weren’t around a decade ago. Some weren’t even fathomable as viable ideas. Then there were skills, like the DVD repairman, that no longer make senes.

The same go for qualifications. If you are relying on the worth of your Masters from 10 years ago, think again. Will you look up-to-date? Will you look dated?

Keep an eye on what’s going on in the world of work. Are there skills that you know are getting traction in the market. Check out Coursera, edX and Udemy for ways in which to upskill. Or simply have a look at YouTube, the world’s greatest university!

Stay connected

Network with others online and offline. No man or woman is an island. Go to meetups. Stay connected on social media, particularly on LinkedIn.

Keep your resume and LinkedIn profile current

At the end of the day, if you start to run out of money, you’ll need to start generating some. That may well mean rejoining the workforce, however much fun you’re having sitting on the beach.

But you have to know how to sell yourself, particularly if you’ve been out of the market for some time. It’s not just having a good quality resume.