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To Your Wealth Michael P Haubrich February, 2006 Career Asset
Management |
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I’ve written in
past columns about the need to consider your career among your most valuable
assets along with your home, retirement account, and other traditional
assets. As such, your career needs to be managed as an asset. It needs to be
viewed with the objective of increasing value, and if it’s not providing
value, we adjust the portfolio—maybe even dump the non-performer (a bad job). The 24/7 global
economy is changing our work place. Skills become obsolete faster. Workloads
and stress are at levels never before seen. Unprecedented demands are also
changing our lives outside of work. As a result, we’re finding clients
meeting with us about retirement, seeing it as an escape hatch to a career
not fitting their work/life objectives.
Many times they
believe the only solution is the all or nothing work or retire scenario. By
viewing career as an asset, we can consider a range of alternatives on the
continuum between not working at all and full-time work until retirement.
This provides the opportunity to optimize the career asset – extend its value
-- and extend its life. Consider a client
with peak wages of $75,000 who abruptly retires at age 60. What if instead,
we extend the career asset for an additional eight years – the first three
years he works at 75 percent of his current schedule and income, the next
three years at 60 percent, and the last two at 40 percent. Assuming an average income and employment
tax rate of 40 percent and a six percent discount rate, the value in today’s
dollar of that increased income is $174,150. Now, that’s a good return on
your investment. We’re
oversimplifying here given that income is the only consideration taken into
account. Other quantifiable measures of a career asset’s values include
employee benefits, increased pension, and Social Security benefit accruals.
Plus, there are qualitative (non-financial) factors, such as job satisfaction
and social interaction. Career
optimization is the process of increasing career asset value.
Comparing a career to a rental property helps explain this. If deferred
maintenance (career skill set) along with a destructive tenant (employer or
negative work/life fit) are allowed to continue, over time the property’s
(career) value will decline, the ability to increase rents (maximize skills)
will be reduced and the useful life diminished. The value of this mismanaged
asset (career) is minimized. But, by evicting the destructive tenant
(adjusting the negative work/life fit factors) and rehabbing the property (learning/applying
new skills or changing jobs), we can increase future cash flow potential
along with the useful life. Career counselors
report that financial fear is the most significant roadblock for employees
making changes to improve work/life fit and career optimization. That’s why
we developed Career Asset ManagementTM , a new service designed for financial planners to use in
partnership with career counselors to manage the financial aspects of career.
By studying this
issue for the past two years in collaboration with our clients, we learned
that by reframing career as a financial asset and working together with
career counselors, we can objectively advise and facilitate discussion and
change for our clients. By looking at the data along side clients, we can
help them get past financial fears and deliver measurable results through
increasing potential income, optimizing work/life fit and extending the life
cycle of their career asset. For the most up to
date commentary on work life issues, you’ll find a new blog
by Cali Williams Yost, author of Work+Life, Finding the Fit that’s Right for You,
as a good resource. The blog, believed to be the
first dedicated solely to work life issues, is at www.worklifefit.com Mike Haubrich is president of Financial Service Group, a
registered investment advisory firm in |