Maybe that mandatory retirement age is not so mandatory after all
Wouter Fourie (CFP®)
Past winner of the FPI Financial Planner of the Year competition and the co-author of The Ultimate Guide to Retirement in South Africa and, Secure your retirement - How to beat the effects of corruption, ratings downgrades and a global pandemic. He is the CEO of Ascor® Independent Wealth Management.
In the last couple of months, I have met with an inordinate number of men and women who have suddenly found themselves on the doorstep of mandatory retirement.
While no one is ever completely ready for retirement, it seems like there is a new wave of people who are at or close to retirement age and who are realising that they are not financially ready for it. These concerned executives often ask if they really must retire. Invariably, they also start questioning the practice of forced retirement at a certain age.
To address this, let us first clear the legal hurdle. There is no mandatory retirement age in the Labour Relations Act, and it actively prohibits enforced retirement owing to age. This is considered an act of discrimination and can easily be challenged in court.
The Act does, however, make provision for a mandatory retirement age if it was written into an employment contract or if there is an accepted practice in the company that has been consistently applied to date. The Act also allows for a mandatory retirement age if this is written into a company-wide retirement policy or in the company’s retirement fund’s rules and regulations.
So, if there is no company rule, you can continue to work for as long as you can do your job professionally. But if there is an obligatory retirement age, you may still have some options available to you.
The first option is to change from being an employee to acting as a consultant. Many companies retain the services of professionals with specialist skills or unmatched industry knowledge, simply out of necessity. If you find yourself in this position, create a company and set up the necessary VAT or other tax structures to be able to immediately transfer from earning a salary to invoicing the company for your services.
If you are not in a position where you can continue working for your company as a consultant, take some time to take stock of your skills and industry knowledge and see if there are certain skills that you can still market to your company. Market yourself to your line manager and make it clear that you would be willing to continue working as a consultant, even if that may be at a reduced rate.
You can also spread your net a little wider and look at other companies that may need similar services. If you have a restrictive restraint of trade, cast your net even wider to include unrelated businesses, universities (as a lecturer in your field of expertise) or certified training providers. Include your soft skills – like your ability to manage people – along with any specific specialist skills.
Looking even further than consulting, you could consider turning your profession into a small business. Did you do the company books? Why not set up a small accounting or tax practice? Were you in administration? Many small and medium-sized businesses are looking for freelance administrative assistants that they can contract for a few hours a week.
If you are considering starting your own business, be careful not to invest a significant portion of your life savings into starting it. Remember that businesses are more likely to fail than to survive, and you cannot risk your life savings if there is even only a small chance of failure.
Circling even wider than starting a related business is doing something completely unrelated. Do you have a passion or hobby that you could turn into a side-hustle and some extra income? I know of an engineer who is also a passionate gardener and who is now consulting on company gardens, while making special orchid mulch for growers in his backyard.
Whatever your plan is, it is important that you should not see your retirement date as a destination. The well-known businessman, Rabbi Daniel Lappin, uses the analogy of a pro boxer who sees his target as some distance behind the opponent’s face. By doing this, his hand is still accelerating when he hits his opponent on the nose instead of slowing down.
If you see your retirement age as a destination, you will most likely start winding down before you reach that date, while you could be accelerating into a new job as a consultant or business owner.
And it would be amiss of me to not mention the important role that a financial advisor can play in helping you prepare for life after formal employment. From calculating the financial impact of different options, talking you through different life annuity options before you are forced to pick one or helping you better manage your cash flow, an FPI-accredited independent advisor is worth his or her weight in gold.
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