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Passionate about investing

Working a Second Job to Save for Retirement

25 July 2012

To say that the world we live in today is constantly changing is a gross understatement. Technological progression on all fronts, from aviation to digital communication has caused the world to shrink, in turn increasing the access of the world’s population to new and exciting opportunities. Coupled with advances in the field of medicine, the world is beginning to see a change in attitudes towards preparation for the future, specifically plans for retirement.

A long accepted practice of individuals in most developed societies has been to save first in order to pay off a mortgage or to educate children and to place retirement plan savings lower in a list of priorities. This normally manifests itself in investing what is left from a yearly income or adjusting a set contribution according to the individual’s personal financial outlook for the year. However, as people’s lives become longer and people are forced to work harder to maintain a livelihood, it seems that people now expect more and more from their retirement. As such, it has become apparent that merely saving where possible creates a shortfall in retirement funds which can seriously hinder the enjoyment of retirement.

The real question is what can be done to prevent this shortfall from occurring whilst still tackling the costs of everyday existence? According to Mike Sena, the subject of a recent article published by Fox Business, the answer is threefold. A financial planner from Georgia, Sena believes that the first stage is breaking away from the “leave it until later attitude” which can leave individuals in the undesirable situation of having to work past their retirement age in order to ensure a comfortable retirement. In itself, this departure should bring with it an inherent desire to avoid consumer debt, as its service presents an immediate obstacle to sound financial planning. At the end of the day, individuals must choose an amount to save – Sena recommends 10-15% – and stick to it.

Whilst this covers the overall strategy for saving, the method is a more difficult proposition. In order to ensure the necessary level of income required to achieve the desired level of saving, a great number of middle aged professionals are taking on a second part time job, such as waiting in a restaurant, to supplement their basic income. This leads back to the necessity for a clear focused attitude towards saving early in a career – individuals must choose to work as hard as possible in order to ensure a retirement satisfactory for them. Unfortunately, the pressures of a second job, often coupled with failure to manage time commitments attached to a family, prove too much for a great number of people. But for those who do, such as David Bakke (also mentioned in Fox’s article), the extra job can make up the majority of the shortfall in retirement saving. However, the arrangement is only possible with total discipline and the use of new time management techniques learned by Bakke in local courses.

With the source of the funds found, the final question remains where to invest it. Many opt for established retirement funds linked to a price index. But Bakke has taken it one step further and invests not only in a 401K plan linked to his everyday job, but also in a mutual fund, where the entire income from his second job ends up. He has calculated that this results a 50% increase in saved income, allowing his yearly total to easily exceed 20,000$.

It seems to me that such aims, though financially sound, are simply incompatible with current social practices and, on a more base level, the broad human condition. Many people will always spend the money they have on the things that they want when they want them. For those not so spontaneous, money is spent on a mortgage or high levels of consumer debt. Though paying off the latter is one of Sena’s recommendations, doing so by age thirty-five is not as easy as it sounds, especially in a time of student loans and easy credit. I also believe that planning for a time thirty or forty years in the future does not fit into the mentality of most twenty to thirty year olds.

Therefore, it is my opinion that whilst good financial planning makes for a much better, less stressful life, using it day to day should allow a decent level of saving for a comfortable retirement, it shouldn’t require a second time consuming job. Why enjoy being young less at the expense of enjoying being old?

Fred Puckle Hobbs

fredhobbs@broadgatefinancial.com

Executive Project Assistant