Rob had grown up with the mantra of his parents about how to be successful firmly entrenched in his mind: “Go to college – Get a job – Pay off the house – Retire.” But after being laid off for the 5th time in 7 years, that model was losing its ring of truth as the way to be successful. There are a lot of paradigms that are shifting these days and perhaps we older folks can learn something from the Millennials who have never had the same kind of expectation of job security we grew to expect.
After being laid off 5 times, Rob started to ask himself, “is going to work for someone else really ‘safe?” Sure, in the short run – there’s a paycheck and benefits and the structure he was used to in the corporate world.
But what about the long run? Rob did a little research and found that after age 45:
- The average length of time an employee was able to stay in a job was 2.4 years. The layoffs were not due to anyone doing a “bad job” but reorganizations and reductions in force due to technology and other factors. While older workers used to be valued for their corporate knowledge, our smartphones now have more memory than the computers that sent the first rocket to the moon and that knowledge is not as necessary. Moreover, older workers cost companies more in health care costs so eliminating this more expensive workforce can reduce expenses – so yes, age discrimination is alive and well despite any laws against it.
- The amount of time it takes to find a job increases exponentially with age and a search of a year is not uncommon over the age of 50 (even though most don’t believe it will take them that long). So, doing the math, we see that at Rob’s income of $100,000, if he is laid off for 1 year and then employed for another 2.4 years, his actual earnings over that period is not $100,000 but rather $70,588 – or almost 30% less than his salary.
- The salaries paid to people over 50 begin to decline rather than continue to grow. In fact, a 20-30% decline after 50 is not uncommon.
Rob decided that it was time to take his financial future into his own hands and invest in himself rather than only investing in the stock market. He used a portion of his 401k funds (using a “ROBS” program that allowed him to take those funds with no taxes and no penalties) and started a franchised staffing business. That business was certainly not without its challenges to get off the ground – but Rob enjoyed the challenges as well as the rewards. After 8 years in the business, Rob was diagnosed with cancer – but fortunately, his employees were able to keep the business running while he was undergoing treatment over the course of the next 8 months. After that, Rob really did not want to return full time to the business and seeing how well his employees had done in his absence, organized things so he would only need to work about 20 hours a week. After another 4 years of part-time work, Rob decided to sell the company – generating a return over 2 times greater than he would have generated in the stock market based on his prior earnings.
As Rob’s story illustrates, business ownership is one of the few areas where one can often gain greater control of one’s own destiny and provide greater long-term security. In a franchise that is a good fit for the owner, it is possible to achieve not only a superior income stream but long term security, stability and often also produce equity, and wealth protection NOT provided with many jobs.