Whether it’s travel, improving your golf swing, catching up on your reading, or finally tackling the to-do list, nearly everyone longs for the relaxation, leisure and fun retirement promises. And why not? Government executives spend their careers working long hours, dealing with endless deadlines and facing tremendous pressure. It never lets up. And things are not getting any easier.
The pace of retirement from the federal government – and other governments across Canada – is at an all-time high and is forecasted to further increase for several more years. The baby-boom generation is packing up and heading out the door. This mass exodus is creating a critical knowledge retention challenge. There is a growing need for the contextual expertise to remain available, and to transfer knowledge to younger cohorts.
As improbable as it may seem to those approaching their well-deserved retirement, a significant number of retired executives are returning to work in some capacity. There’s a trend emerging. Like a boomerang kid returning to the family home after a period of independence, many “Boomerang Execs” are veering back to the familiar surroundings of the public sector after taking a sabbatical for a few months or a few years.
Why do people return? During my 10 years as a consultant-recruitment specialist, I’ve assisted hundreds of retired government professionals, facilitating their transition into consulting. This is why they do it:
Some people find retirement wonderful for the first few months or years but then become restless. Many want to augment enjoyable pastimes such as travel, golf, reading and other leisure activities.
Scientific studies advise us to stay physically and intellectually active to maintain optimal health and longevity. Some retirees remain active through their hobbies while others enjoy volunteer work. For many, returning to the workplace is how they choose to keep active.
But what about the stress? Boomerang executives report that consulting is less stressful than pre-retirement worklife. One can focus on a specific project or certain duties without the distractions and diversions typical in management positions. You’re less likely to be rushing to consecutive meetings or dealing with the crisis of the day.
The workplace is a social place where lifelong friendships can form. Retirement may isolate you from this social network. Consulting, even on a part-time basis, maintains these connections.
Some return to the workplace, not just for the money, but also to “give back” to an organization in appreciation for a wonderful career and the life it has provided. They are proud to have spent their careers as professionals in the public service. They feel a sense of duty to give back to the organization, to the younger workers and to their country.
Government managers and executives are leaders to dozens, hundreds or even thousands of employees. It can be a difficult transition to go from the executive suite to the lazyboy chair overnight. Consulting can provide a bridge to full retirement. Although contract positions typically do not involve authority over staff, often there is a mentoring and coaching role. Younger workers look to experienced managers for their knowledge and expertise.
While government pensions are among the best in the Canadian workplace, income drops significantly after retirement. Consulting provides money for extras such as travel, home renovations and post-secondary education costs for children.
Tips of the trade
If you are thinking about working as a consultant following your retirement, do what you love. Focus on the things you enjoy and have fun. You will do a better job if you are passionate about what you’re doing. Also, since we live in a world of specialization, concentrate on a few areas rather than trying to be a jack of all trades.
Whether to incorporate?
How will you structure your new consulting business? You can operate as a corporation, a sole-proprietor or as an employee. It is strongly recommended that you contact a professional accountant and/or lawyer to discuss what’s involved.
As a sole proprietor or incorporated entity, you may deduct allowable business expenses like parking, travel, business meals, professional development, business cards, office supplies as well as furniture and computer equipment used solely for the business. As an employee, you cannot deduct business costs.
The question often arises, should I incorporate my consulting practice or not? Here are some general things to consider:
· How long and how much do you plan to work after retirement? If only for a year or two on a part-time basis, perhaps the sole proprietor option is more suitable for you. A sole proprietor business is easier to establish and tax reporting is simpler than an incorporated business. On the other hand, if you plan to work for several years and earn a sizable income, incorporation may be the way to go.
· Incorporation provides the opportunity to defer tax. Suppose you’ll be earning a substantial pension and would like to keep some of your consulting income as additional income to be received in future years. Through incorporation, the taxable income of the corporation can be accumulated until you decide when and how to receive payment. The corporate income will be taxed at a much lower rate than it would be otherwise if received personally.
· Incorporation provides the flexibility to income-split and save a significant amount in taxes. The corporation can pay dividends to family members who may have a lower income (i.e., a spouse or child 18 years or older). This scenario requires a well thought out tax strategy and shareholder ownership structure. Your tax strategy should include deciding who should be shareholders of the corporation and what classes of shares they own.
As with any business, you’ll need to market your services. For self-employed consultants, building and maintaining a strong professional network is vital. You can begin this process long before retirement. To increase your profile, volunteer for workplace committees, participate in professional associations and charitable organizations, attend conferences, or better yet, speak at conferences. Upon retirement, reach out to organizations capable of marketing your expertise.
While social media continue to provide new ways to communicate, the old-fashioned business card is still an important tool for consultants. Carry some with you at all times. You never know who you may run into at the grocery store, golf course or a retirement party. They can cost as little as $50 from business supply stores. When designing the layout of your card, consider adding a few bullet points to describe your key skills (for example, Auditor, Policy & Analysis, Human Resources, Project Management).
Keep it short, ideally three to six pages. Include a profile section on the first page where key skills, qualifications and other highlights are summarized in bullet points. This is your executive summary. Next, list your career positions or recent consulting projects in reverse chronological order and include your successes, accomplishments and key duties for each. Less detail is required for early career positions.
As your retirement date approaches, take steps to ensure your security clearance remains active. Most federal government departments close your file when you retire, thereby inactivating your security clearance. You cannot work in